Can M-Pesa Replace Cash In Kenya?

This summer Amrit Pal decided to give up cash for 60 days and to rely solely on mobile payment solution M-Pesa. The mobile money enthusiast wanted to find out how receptive business are to the technology, how costly it is for the consumer in the long run and what “infrastructural edges” might need “smoothing”.

After 11 days Amrit reviews the experiment for the first time and noted that he spent 4.75% of his money in fees and overheads to M-Pesa. He observed that while mobile payments were widely accepted at small independent stores, larger outlets presented payment challenges. Because these large retailers have little incentive to accept M-Pesa mobile money use is difficult, and many times transactions do not go through.

A week later Amrit had managed to work around the hefty M-Pesa fees. He found out that some retailers where charging withdrawal in top of transfer fees users already need to pay. Instead of paying for these each time, Amrit convinced certain retailers to group them, paying for a single fee for several payments. This got the mobile payments aficionado thinking about the impact of transaction fees on the evolution towards a cashless society. While M-Pesa’s traditional platform might be a great solution for large sums of money, it becomes rather expensive when you pay for small amounts like your daily grocery shopping.

Despite Kenya’s impressive mobile payment record – 20% of the country’s GDP moves through M-Pesa – the issue of transaction fees needs to be addressed for the platform to become a viable solution for every day payments. M-Pesa has a serious advantage against other cash though – it’s extremely safe. At the latter stages of the experiment Amrit was approached by a thief who wanted his money; upon seeing his $20 phone and a copy of his passport he left, disappointed.