In fact, over-the-counter services, where a mobile money
agent performs the transactions on behalf of an unregistered
walk-in customer, are now the fastest-growing
segment of active mobile money users, at a 102%
annualized rate, most of it in South Asia.
But as with most Bitcoin proponents, those looking to expand its reach, remain utterly undeterred by any of this. Mainly they argue that the same things holding mobile money back will allow Bitcoin to come in.
Africa and the Middle East processed $5.7 billion in mobile money volume last year. No other country has come close to Kenya in terms of mobile money adoption. Check out this chart showing volume breakdowns. Eastern Africa dwarfs all other regions. East Asia and Pacific, represented by Indonesia, appears to be the next closest. The rest of Africa barely registers.
"It's a transitory solution, it’s not a permanent solution," he said. "It’s been very effective but it's extremely primitive — it's showing it's age. ... I don't know how long it will take but I just don't see a particularly large future for it."
But a new survey from trade association GSM shows that even the most promising emerging-market electronic payments technology, mobile money, has only just begun to break out, meaning it could take years to unseat cash as the payment method of choice in the developing world.
Aditya Khurjekar, a former Verizon exec, agrees that services like M-Pesa will prove temporary in the long run. Even if it's not Bitcoin itself, a Bitcoin-like payment "rail" that uses a network of computers to confirm transactions will take over, not just in Africa but everywhere.
"Activating customers remains a challenge for a large number of services," GSM says. "Even when customers are aware of the service, they may not necessarily understand how they would benefit from using it. Using mobile money represents a significant behavioral change in economies where almost all payment transactions are conducted in cash."
Here's the chart:
"Countries where there may be 3 mobile money operators with roughly the same number of subscribers, if that’s the case, then [mobile money] not used widely," Pelle Braendgaard, the outgoing head of Kipochi, a Bitcoin payments app targeted at developing markets, told BI. "As a user, if I want to send money to anyone, I have to have an account with each of these services, so it's just not very practical."
Mobile money can be used for just about anything. You can buy stuff at a grocery store. You can send and receive money to and from friends and relatives. You can pay and tip your taxi driver. And you can buy phone minutes. To upload or withdraw cash, you need only walk to a mobile money agent.
As with most things Bitcoin, it's simply too early to expect a substantial expansion in emerging markets. M-Pesa caught lightning in a bottle thanks in large part to massive backing from a multinational conglomerate. Given that Bitcoin is premised on doing away with such entities, it will likely have to wait a long time to compete.
These are the 575 million individuals in mostly emerging markets who lack access to basic financial services, even a bank account.
By GSM's reckoning, many citizens of the developing world have only begun orienting their commercial lives around the promise of mobile money. So it's not surprising that Bitcoin's rollout in the developing world has been sluggish. Here's a chart (used with permission) from a new Coindesk report showing the breakdown of Bitcoin vendors by region:
What's more, M-Pesa now faces an "innovator's dilemma," in that it's too big and too entrenched to act upon what's on the horizon, Braendgaard continued.
Within Kenya, M-Pesa has become so ingrained that competitors have struggled to make inroads, meaning innovation has stalled out.
But of the 203 million registered users, East Africa accounted for 34%, with the vast majority of those being in Kenya. And the number of active mobile money accounts totals just 61 million — barely 30% of total registered users.
Here's an M-Pesa stand in downtown Nairobi. This is where you withdraw and deposit money.
The number of registered mobile money accounts nearly tripled to 203 million in June 2013 from 71 million in June 2011. And the number of active users — those who made at least one transaction within the last 90 days — nearly doubled from 2012 to 2013. There are now 218 different providers beyond M-Pesa worldwide.
"Mobile money is a young industry with over 80% of all deployments launched within or after 2010," GSMA director-general Anne Bouverot said in a recent statement. "In order to accelerate the growth of mobile money, we call on telecommunications, financial sector regulators and policymakers to provide a policy and fiscal environment that enables these services to be rolled out successfully to promote a nascent and important driver of commerce and socio-economic development."
"It is a business-model problem," he told BI. "I think what Bitcoin — the cryptocurrency infrastructure, the technology — does, is it makes these artificial constraints irrelevant. It doesn't matter what geography you’re in, whatever local bank consortium you're in, how quickly they have to settle money, it doesn't really have to follow these artificial constraints."
GSM also found that remittances — another key Bitcoin selling-point — remain a "marginal service" among mobile money providers, though more seem to be adding them. Providers said they processed fewer than 50,000 international remittances in the month they were surveyed. "While a large number of providers are interested in launching international remittance, major barriers continue to slow down the uptake of this product," GSM says. Instead, the fastest-growing transactions type is bill pay. The largest service overall remains buying more mobile minutes. Here's a breakdown of how mobile money was used in a single month:
He also observes smartphone use is steadily increasing — and indeed Safaricom now says 67% of mobile phones sold in Kenya are smartphones.
These services "offer a compelling value proposition for unbanked customers, a segment where literacy levels are often very low and where people tend to be more suspicious of new technologies."
The granddaddy of mobile money is a service called M-Pesa. Launched in Kenya in 2007, the service was an overnight sensation, and is now used by much the adult population there. Its success is chalked up to close collaboration between the Kenyan government and Safaricom — the unit of Vodafone that operates M-Pesa — that allowed the service to spread. It also began life as a pilot program for microlending, which allowed developers to realize users were tapping the service to send and receive payments instead. After this, there was a huge marketing push.
"Some people have been using M-Pesa for three, four, five years, and are reluctant to take on new services," Mustafa Golam, a consultant for Nokia in Kenya, told Business Insider. "There's a lot of technology-phobia — very few people will actually try it because they're happy with M-Pesa."
A central conceit of Bitcoin evangelists is that the cryptocurrency could be most useful to "the global unbanked."
In principal, the advocates are correct. The time it takes to process a bitcoin transaction — about 10 minutes — is far faster than the three days it would take in the regular banking system. It's also usually cheaper.
GSM's data data show a strange phenomenon.
Here's what the homescreen of M-Pesa looks like:
Central bankers and legislators haven't caught up to the inherent promise of mobile money.
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