Mobile money slowly turning East Africa into cashless society

[Stephen Gornick]

Well, Western Union isn't cheap either, but really, do we expect people to pick up something quite novel and challenging (where you have to care yourself for security and infrastructure, especially if you're a merchant) at such a premium?

Here's a post from another thread that directly responds to this:

Of course the added expenses in converting from cash through payment intermediaries like CashU will limit bitcoin's usefulness in the instances where that is needed.  But compare the costs to Western Union though and to other methods of sending money from one part of a country to another, or internationally within Africa or overseas, and this doesn't end up being such an uncompetitive rate.

Here's an example of why this matters:


 - http://pymnts.com/commentary/Tips-for-2012-Understanding-Payment-Behavior-of-African-Households-A-Vast-and-Untapped-Market/

That shows that more than half of remittances do not use mobile payments.

Few mobile payment networks support international remittance transactions being one reason for that.  
 - http://technology.cgap.org/2012/03/21/what-do-international-remittances-mean-for-mobile-money-cgap-releases-study-on-remittances

But bitcoins won't just be useful as an alternative to Western Union for remittance transfers for the continent.  They'll be useful for a wide variety of transactions -- they can be used to pay for a commercial shipment electronically so that the delivery driver isn't carrying large amounts of cash, for instance.  Bitcoins will be useful for travelers who wish to convert out of the currency in one country and then used to acquire local currency in the next.

So even with a high level of friction when buying bitcoins using CashU, once bitcoins are acquired they can circulate without being converted back to fiat outside the local community.  

This is sure to happen since anyone can function as an exchange.  This exchange function is one that has almost no barrier to entry and could be profitable for those who begin to offer this service.  The techies at the cyber-cafe are likely one example of where these first exchanges will occur  -- especially since that's where tourists are found.   Or those already operating as exchange agents might start participating as adding bitcoin to the mix is just a small additional effort.

Keep this in mind ... with each Western Union transaction sucking a minimum of 10% of the payment, and mobile payments in the 5% range for smaller payments (e.g., under $40 range), bitcoins when purchased through CashU even don't need to change hands twice before they've become a better value as a payment system than had the same amount of funds been transferred through the alternatives.

The key though is that previously there was no way to seed this.  This CashU option actually gives the ability for entrepreneurial individuals on the ground there to get bitcoins into their hands so that they have something to use to start trading.

Next what is needed are some stories of actual bitcoin commerce occurring.  For instance, there are many tech and business incubators on the continent  - a perfect place for bitcoins to begin circulating among a small group of willing participants who generally are among the early adopters and wouldn't entirely resist trying something new like this.  Here's an example:

 - http://www.meltwater.org/who-we-are/our-campus/

[1713452021]

1713452021

[Boussac]

The system used in Africa is based on the GSM standard that lets the operator put simple menus on the users screen:

http://en.wikipedia.org/wiki/Unstructured_Supplementary_Service_Data

Yes because mobile internet is not enough widespread there yet (even if there are tens of millions of smartphones in the field).

The problem is that the SIM is still needed to identify whoever initiated the USSD session, meaning that the roadblock here is not technical but contractual: one needs to convince the local mobile operator to deploy the system, right ?

[Stephen Gornick]

Here's a post from another thread that directly responds to this:

Next what is needed are some stories of actual bitcoin commerce occurring.  For instance, there are many tech and business incubators on the continent  - a perfect place for bitcoins to begin circulating among a small group of willing participants who generally are among the early adopters and wouldn't entirely resist trying something new like this.  Here's an example:

 - http://www.meltwater.org/who-we-are/our-campus/

The co-founder of Ushahidi, Erik Hersman, wrote an article on how there is tech growing from within, for solving the problems that those living there see them.


"From Kenya to Madagascar: The African tech-hub boom"
 - http://www.bbc.co.uk/news/business-18878585

Excerpts:

I've talked to a couple of start-up entrepreneurs - Pule Mmolotsi, who is testing out an Oyster-like card for public transportation in the country.
[...]
in the past two years there has been an interesting phenomenon in Africa - the proliferation of tech hubs and incubators.
[...]
There are now more than 50 tech hubs, labs, incubators and accelerators in Africa, covering more than 20 countries. In Nairobi, we have six.
[...]
if we had waited for the government to create the iHub in Kenya, we would still be waiting today.
[...]
Innovation comes from the edges, so it comes as no surprise that innovators are found in the margins. They are the misfits among us, the ones who see and do things differently.
[...]
The tech hubs in Africa provide a home for those with new and innovative ideas, create an atmosphere where they are encouraged to try new things, and most importantly are able to meet like-minded individuals they can grow with.

Erik is aware of bitcoin.  A few months ago he tweeted:
"OH @iHub: "Bitcoin gets bad press since it reminds us all that currency is a shared delusion"
 - http://twitter.com/whiteafrican/status/192945935372914689

I've no doubt bitcoins are a topic being discussed every so often in these tech spaces.

I look forward to learning how bitcoin might be used in new way there.  

[DublinBrian]

Some african central banks are trying to dissuade their citizens from using the USD.

http://www.zerohedge.com/news/africa-just-says-nein-us-dollar-time-go-short-usdzmk-and-usdghc

The interesting part of the article for me was this at the end.

A central bank ceiling on over-the-counter dollar transactions at banks has sent Ghana's class of China-bound traders into street-side foreign-exchange bureaus that normally cater to fanny-pack-clad tourists. Chinese importers often show up just before flights back to China desperate to buy $100,000.

It seems that african importers of chinese goods pay for those goods by physically carrying dollar bills on flights to china. It would be far more secure and private for those business travellers to carry bitcoins.

If anyone is in Ghana, I think these exchange bureaus and their business travelling customers need to be introduced to bitcoin.

[Paul Troon]

Here's an interesting development:

https://bitcointalk.org/index.php?topic=252238.0

Kenyans will be able to send and receive Bitcoin and convert it to and from an M-Pesa balance. You can also buy and invest in Bitcoin. Though what stands out the most is probably the fact that the Kenyan diaspora will now compete with international transfer companies such as Western Union. Exchanging money will thus be made much cheaper as Bitcoin only charge US$0.04.
Kipochi works on all mobile phones, having SMS, USSD and HTML5 frontends, as well as a desktop computers

.

[villanfonsDC]

How can east africa become cashless...?

[jasperIL2267]

I doubt africans will EVER accept Bitcoin..

[Stephen Gornick]

Here's an interesting development:

https://bitcointalk.org/index.php?topic=252238.0

And another interesting development:
 - http://localbitcoins.blogspot.fi/2013/07/trading-bitcoins-using-m-pesa-in-kenya.html

I'm not familiar enough with M-PESA t know what this offers though.  I need to be an M-PESA agent to accept funds, right?   And if I'm an M-PESA agent there's probably a terms-of-service as to what transactions are allowed.   Or am I misunderstanding how it works?

[moni3z]

Only way to be an M-PESA agent is to have 3 businesses operating for longer than 6mos, and they have to be physical locations in 2 different provinces/territories and you need police dept references. Lol

Individuals can just send money to each other without being an agent, and I think "premium" M-PESA accounts can receive up to USD$30,000 per month. They claim no chargebacks are possible but yeah once fraudsters start using stolen bank accounts to bill pay M-PESA accounts and cash them all out in 24hrs that will change.

[Stephen Gornick]

Individuals can just send money to each other without being an agent,

I found a fantastic article describing M-PESA further:
 - http://www.cgap.org/blog/10-things-you-thought-you-knew-about-m-pesa

So an individual can have a balance no more than 50,000 KES (~ $575 USD).  
There cannot be more than 70,000 KES (~ $800 USD) transferred out of an account per day, and 35,000 KES (~ $400 USD) is the most that can be transferred in a a single transaction.

So while these limits have relatively small amounts, they are still high enough that an individual could use this service for a remittance payment to family back in Kenya.  

There already is an M-PESA IMT (international money transfer) method in which money is sent through Western Union and the recipient is an M-PESA user but of course the fees for that are quite high -- generally, at least 10% or more for transfers of $400 or less including loss when the exchange rate conversion occurs.  

With Kipochi the sender can handle all the transfer details and the remittance recipient gets an SMS alert when the funds arrive in M-PESA.  So there is no learning curve or technical hurdle here on the recipient's end.

There's even room for an individual to become an independent provider (agent) of Bitcoin remittance cash-out.  This person would use Kipochi to get started by converting bitcoins received into a form of funds the agent can use for spending.  Then once that agent's volume is heavy enough it then makes sense to work with a local Bitcoin exchanger (to restock the agent's inventory of schillings) and skip the costly M-PESA conversion entirely, as every schilling counts!

[row5_seat47]

CGAP: Bitcoin Not Helping the Poor
World Bank and Gates Foundation Sponsored CGAP Gives Bitcoin Thumbs Down

In depth article here
http://letstalkbitcoin.com/cgap-bitcoin-not-helping-the-poor/

[bitcerto]

The infrastructure will expand and the internet will continue to be increasingly accessible.

I believe we'll start seeing countries who have been trying to escape laughably unstable national currencies unofficially adopt BTC, or some alt coin made for them. Imagine being a person in Cambodia who is now able to use BTC (smartphones and internet reach is no problem there) and sidestep the strange mix of USD and the Kip.

Simply having easy access to a decentralized currency is a game changer for people in "third world" (that title is so outdated and demeaning). Africa alone hosts countless countries that haven't been able to setup a stable economy. As long as they have a decent telecommunications infrastructure, they can tap into the relatively stable BTC economy.

It's an interesting situation and one I'm happy to be alive to see. We're looking at giving billions of people access to a currency that sidesteps all of their national bullshit and faults. Of course, there is work to be done, but I hope to see emerging markets and developing countries adopt the use of BTC and perhaps an alt or two.