Mobile Money gets Groked

What a fabulous week I have just had in Kenya. Home to many things, it is the current home of mobile money. Ask any Kenyan what mobile money is and how useful it is and you will get a very clear answer. If you asked the same question in the CBD of London or Sydney and you will struggle to get answers as accurate and consistent.

There are plenty of good reasons for why peoples comprehension of mobile money in Africa is ahead of the general population in the developed world. Not least of these are security, availability and the choice of alternative payment mechanisms. Carrying cash around in Kenya, as it is in any African country, poses a significantly greater security risk than it does in Sydney or London. Likewise Chip and PIN, Pay Wave and card usage have gathered significant penetration in the developed markets while rollouts lag in emerging markets.

Regardless, just as Google moved from being a noun to describe a service to becoming a verb for search, so too has M-Pesa become a verb for mobile payments. You don't have to be in Kenya long before you'll get M-Pesa'd; Buying airtime, paying for taxis, there's lots of trabsactions that, even for a tourist, it is easier to do by just handing your cash to Safaricom and then letting the technology take do the hard work.

M-Pesa began life as a micro loan solution. In early trials it soon emerged that simple cash payments were a much greater need and one that more people were able to grasp faster. A hand full of years in, the micro loan capability is starting to gain traction as people grok it. To "grok it" was coined by 60's sci fi novelist Robert Heinlein in his classic novel "Stranger in a strange land" to describe what happens when someone understands something so thoroughly that the observer becomes a part of the observed.

Micro loans are getting grokked in Kenya. They are becoming such an integral part of how segments of the population work that the product is part of how they think.

I realised this when I heard the story of a Kenyan taxi driver. Kenyan taxi drivers are noted for operating their cars on fumes. Indeed, much of the time the first thing a driver does when he picks up a fare is drive to the petrol station. This will be particularly true at the beginning of a shift as the previous driver, not wanting to gift the next guy any fuel will have driven the car to its last drop. Not only is the car empty at the beginning of the shift but so often, so too the cabby's wallet.

This is a problem in the post pay environment of taxis. Faced with an empty tank and an empty wallet the cabby faces a conundrum. How to accept the fare, get gas in the tank, deliver the customer to the destination and then receive payment?

Enter micro, short-term, mobile, financing in banker's parlance. In Kenyan its simply called M-Shwari, the loan component of M-Pesa. More and more cabbies faced with the conundrum above simply accepts the fare, then gets out their phone to request a loan for a quarter of tank of petrol, then hop kangaroo style, to the petrol station on their last fumes.

Once the driver and passenger arrive at the destination the passenger M-Pesa's the cabby. The amount appears on the cabby's phone, which is then used to pay off the loan. Start to finish in 30 minutes and everything on the mobile phone. It is everything a well-designed product should be: Easy to on board, easy to use and solves a fundamental problem.

With solutions as elegant as this, it won't be long before we see the worlds unbanked population of 2.8 billion steadily begin to dwindle. They just might not be banking with banks.