Digital Payments Are Transforming Economies

Physical cheques never gained popularity in Africa, though they remain in use in America; why is this? Slow transportation links, fraud, and limited access to formal banking were to blame on the continent.

In the early 2000s, M-PESA Africa was launched in Kenya, before the advent of smartphones and USSD technology, making Africa a leader in mobile payments and leapfrogging other parts of the world. M PESA allowed users to send money using SMS text messages.

The founders of M-PESA thought customers wanted access to credit but soon discovered that the biggest desire was to pay others, buy goods and transfer money. Vodacom, one of the founding companies, allowed consumers to buy airtime at a 5% discount; this grew confidence in the platform and expanded the early user base.

By 2012, the company had 17 million customer accounts registered and expanded to neighbouring countries. It was estimated that the ability to move money in an effective and efficient manner caused per capita consumption levels to increase and pulled nearly 200,000 households out of poverty in Kenya alone.

Today countries like India (who removed 86% of the cash in circulation in 2016) are becoming more digital in payments and money movements, allowing business to flourish and people to use electronic money; even without a bank account. Digital payments are promoting financial inclusion among the unbanked while increasing transparency and decreasing corruption.

Digital payments also allow people to have more control over their money, particularly women. The fast-moving sector not only fosters local payments but growing cross-border transactions, especially in the remittance arena. While M-PESA paved the way decades ago, the digital payments industry continues to evolve as more innovative companies enter the arena.