Why mobile money is popular in Africa, but not in the US

African countries like Kenya have leapfrogged traditional banking systems by using mobile phones to store and spend money. Do Africans have the better deal?

For several years now, Western technology commentators and analysts have proclaimed the imminent rise of mobile cash – the ability of users to conduct financial transactions using an application on their phone. And for several years now, Western technology users have remained militantly uninterested. Analysts’ excitement for the technology seems to be based on solely on coolness and the search for profit. How cool would it be if we could pay for our meals with our phones? How profitable would it be for the companies who facilitated our payments were we to take care of dinner with our iPhone or Android?

But on a recent trip to Kenya to cover that country’s booming mobile applications industry, I was surprised to see that the futuristic world of mobile money was accepted by most Kenyans as the norm. There are, at last count, 17 mobile cash companies in Kenya alone. And that raised a question: Why would mobile money be more acceptable in Africa, a continent not generally known for technical innovation, than in America, reputedly the most advanced nation on earth?

After talking to a host of American tech professionals at a recent conference, ReadWriteWeb’s Dan Rowinski boiled down their assessment of mobile cash to: “This is not something I would use to buy a fridge." In most parts of Africa, by contrast, where mobile cash is extremely popular, it is often the only way, excepting paper money, to buy a fridge.

The University of Nairobi’s Tonny Omwansa, who is writing a book on mobile money, believes the slow growth of mobile cash in the US comes down to Americans’ trusting relationship to banking institutions, despite recent protests.

“The little time I spent in the U.S., I noticed folks very confident of the (banking) system which is very much accessible to them, unlike many African countries,” he told the Monitor. “Rarely would you find a rural poor (African) asking ‘How secure is M-Pesa?’ But this question easily comes up when I meet typical Americans.” M-Pesa is the most popular mobile cash app in Africa.

In Africa, mobile cash has been going gangbusters for years. The reasons are both structural and cultural, even among those who use a traditional banking institution.

“Besides accessibility, most banked people in urban Kenya prefer mobile money for its convenience and speed,” said Omwansa. “Keep in mind that Internet penetration and use of e-banking and e-commerce is low, so mobile money just fits the bill.”

Simeon Oriko, mobile technologist at m:lab East Africa, a mobile development lab in Kenya, described  the popularity of mobile cash in Africa as a family affair.

“Mobile money for me is a cultural issue,” he said. “It has very little to do with the technology itself. Mobile money channels in Kenya generally flow within family units. Secondly, mobile money offered a way for the unbanked to bank their money in a way that's personal and that fits right within their lifestyle.”

Ben Lyon is the co-founder of Kopo Kopo, a Nairobi-based company that helps businesses accept mobile-based payments from its users. He explained why mobile money has been so popular and successful in Africa, especially in East Africa where the industry dominates.

“It has been so successful in these markets because it leapfrogged the payment card industry,” he said, “which requires expensive ATM and Point of Sale (POS) networks to function. ATMs and POS Terminals require regular maintenance and, with ATMs, regular liquidity balancing.  By leveraging third party retail outlets and making the phone the primary means of exchange, mobile money bypassed the need to distribute ATMs and POS Terminals. The reverse is true in the US: mobile money isn't leapfrogging the payment card industry, it's augmenting it.”

One of the reasons that mobile cash has yet to catch on in the US, aside from the (sometimes too-open) access to credit and to banking services, is the complexity. M-Pesa and its competitors have to make their services as responsive and simple as possible to accommodate a wide spectrum of user needs, education levels and technology types. But here in the US, mobile cash comes in a bewildering variety of types, none of which have much common ground.

Google Wallet is a near-field communication tool, which allows a mobile phone owner to make a payment by tapping or waving it “near” the pay-point or cash register of a store. That’s great, if your retailer of choice has an NFC reader. Such readers are becoming more common, but by no means ubiquitous. It also requires a credit card. Mastercard’s PayPass requires, well, a Mastercard. Zong charges purchases to your mobile carrier. Square uses a dongle to swipe credit card numbers, but does not pay out.

There is, in essence, too much complexity and too little utility for mobile money here in the US. There is no shared platform for payments and most of the current offerings are merely wrappers for credit cards. And, most importantly of all, in the Western world, mobile cash is, depending on whether you’re an entrepreneur, a financial institution or a user, an opportunity, a potential for growth or a convenience. It is not the solution to a problem.