On the face of it, you would be forgiven for thinking that the golden boy of mobile innovation had hit its first serious obstacle. Last year the gap between ‘mobile money’ and ‘plastic money’ narrowed continually as the payment providers rolled out some aggressive marketing to capture market share. Further pressure will be applied this year as Visa targets small retailers.
Security and fraud will be cited as the main reason for the growth of plastic. With mobile money you are still dealing with cash. With plastic money you are not. The infrastructure that underpins M-Pesa is built on people managing cash and is wide open to various types of fraud. Agents can be distracted and false entries made in ledgers. Inspectors can have their identity stolen and fraudsters can fool agents into handing over the cash that they hold. It is a fragile structure.
But there is a bigger trend at work. M-Pesa and M-Pesa like systems work when the alternative is cash, muggers and long journeys to get cash to your family. The move to plastic is the next step in the evolution and sophistication of a nation.
Mobile money will not disappear. There will be those who continue to use it, because a distrust of banks. Mobile money will continue to be rolled out in countries where the number of mobile phones outnumbers the number of bank accounts.
Putting aside the profits of companies that run such systems, mobile money is one of the key catalysts that kick start entire economies. In countries such as Nigeria, every million phones that are sold will increase the GDP by one percent. That is huge. Mobile money allows those million people to become hugely more productive. That adds even more to the health of the economies, and encourages the next stage of growth that leads to bank accounts and from there to credit worthiness and onwards towards a stable, growing economy.
And, even if less and less people use mobile money itself, as the economy grows they will use their phones to access the vast range of digital services that we are used to in the ‘developed’ world. Thank you, M-Pesa.