This ecosystem has taken off like a rocket, especially in emerging markets. You went from basic infrastructures to absolutely state-of-the-art.
Gautam Jain, ‎Global Head of Digitisation and Client Access, Standard Chartered Bank

The mobile wallet, a fixture in smartphones today, goes back a decade with beginnings that may surprise. The story begins in 2007 in Kenya, one of Africa’s emerging fintech hubs and an early adopter of mobile technology. Workers wanting to send remittances to family members back home started experimenting with a mobile application to transfer money directly to the phones of their relatives.

That prompted the creation of M-Pesa – which combines the words mobile (‘M’) and the Swahili word for money (‘pesa’).

“It’s a story that I often tell,” says Gautam Jain, managing director and global head of Digitisation and Client Access at Standard Chartered Bank. “The whole mobile wallet mass adoption started in Kenya. One of the most interesting use cases was about workers in the city trying to send money to their relatives in the village.”

The mobile method of sending remittances had many advantages over the earlier methods. “What they used to do previously was to take their cash, go to the nearest bus station and find a bus that was going to their village. They would give the money to the driver, who had to find the relatives to drop the money off,” Jain says.

That, of course, posed many problems. The money transfer would often take days and use precious resources, not to mention the dangers and security risks involved.

Now, a sender can simply press a button on a mobile phone and loved ones will receive the cash instantly on their phones. M-Pesa also allows users to deposit, withdraw, transfer money and pay for goods and services.

“This ecosystem has taken off like a rocket, especially in emerging markets. You went from basic infrastructures to absolutely state-of-the-art,” Jain says.

Sub-Saharan Africa, with its fast adoption of mobile technology, has become a global leader in mobile money. Telcos were quick to develop mobile wallet services to enter markets where existing infrastructure was lacking to create a thriving mobile money ecosystem.

The mobile wallet is an example of ‘leapfrog’ technology: places where fixed-line technology never existed can now jump ahead of outdated communications infrastructure and advance to a 21st-century banking ecosystem. In 2015, 2.8 trillion Kenya shillings ($28 billion) was transacted through the platform, equivalent to about 44 per cent of the country’s GDP of $63.4 billion in the same year.

The technology has also transformed how non-government organisations (NGOs) operate in parts of Africa. NGOs used to hire a van with security guards to transport cash to send relief aid for food and supplies to needy families in remote regions. The driver and security guards contended with rough rural roads and the threat of bandits. Now, administrators at an NGO office in Nairobi can simply press a button and send the money instantly to the mobile phones of the recipients.

In emerging markets, most people still pay or get paid in cash. Mobile wallets are changing all that, allowing people to use mobile wallets such as M-Pesa to provide a fast, cheap and safe alternative. Mobile technology has opened up avenues for business, commerce and NGOs to operate in otherwise fragmented and underdeveloped regions.

In the process, the financially excluded can now be included, offering a safe way to save and transact money, create a financial identity and credit history, insure their property and access loans and other financial services. 

As mobile phone penetration rates skyrocket, mobile wallets are increasingly becoming the gateway to banking and financial services. “Mobile penetration in some markets is over 100 per cent,” Jain says. “It is quite fascinating to see how this space evolves and how people are using their phones to conduct their everyday business.”

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