Wednesday, November 25, 2015

M-PESA Breaks Down Regulatory Entry Barriers

A nice story by 60 minutes demonstrates the value of mobile money. What large corporations are jockeying to roll out in the US, Kenya has been doing for years with the most bear bones of mobile technologies. Users are able to make millions of micro-transactions per day over the mobile network using M-PESA. There are heart warming vignettes about the various ways  this benefits consumers. But the best part of the story for me was the erosion of entry barriers (around the 11:00 minute mark). The CEO of the mobile carrier explains:
Actually, when M-PESA started, Kenya's commercial banks implored the government to impose regulations to impede its development, but the government decided to take a hands-off approach, which is pretty unusual.

But other jurisdictions have taken notice.
The most effective barrier for the success of mobile money around the world is the banking lobby. The banking lobby in most parts of the world is a very strong lobby. And banks have looked at what's happened in Kenya and have decided that they don't want to see that happening in their own countries. 

But for the courage of some Kenyan government official, this may never have gotten off the ground.

4 comments:

  1. The adoption of the cellular GSM networks in Africa was a godsend and enabled thousands to become entrepreneurs overnight. The GSM networks eliminated the need for land lines and in doing so indirectly eliminated the need for brick and mortar in many industries, thereby reducing the amount of capital needed to establish a business and helping to create a great environment for the micro entrepreneur. As the 60 minute story indicates, the lack of regulation from Kenya’s Central Bank allowed these micro businesses to flourish and the elimination of barriers into this industry means that consumers benefit from the amount of choice they have in the marketplace.
    Here in the U.S, industry consolidation and steep entry barriers ensure that consumers have little choice in the market place while industry players reap great profits.

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  2. The adoption of the cellular GSM networks in Africa was a godsend and enabled thousands to become entrepreneurs overnight. The GSM networks eliminated the need for land lines and in doing so indirectly eliminated the need for brick and mortar in many industries, thereby reducing the amount of capital needed to establish a business and helping to create a great environment for the micro entrepreneur. As the 60 minute story indicates, the lack of regulation from Kenya’s Central Bank allowed these micro businesses to flourish and the elimination of barriers into this industry means that consumers benefit from the amount of choice they have in the marketplace.
    Here in the U.S, industry consolidation and steep entry barriers ensure that consumers have little choice in the market place while industry players reap great profits.

    ReplyDelete
  3. As a loyal 60 Minutes viewer, I found the M-PESA story quite compelling. I also thought about my 2013 trip to the Philippines for three weeks. One thing that was clearly apparent was the prevalence of mobile phones and how ubiquitous it had become. In the United States, information sharing evolved from computers, websites, and then onto mobile apps. Technology dictated how information would be shared. In third world counties, however, solutions are following the technologies instead. In Kenya and Philippines, everyone has a low-end mobile phone and drives all information sharing and communication. As a result, it is no surprise that a simple no-frills system like M-PESA to catch on quickly. In the United States, we certainly have information overload and we still haven’t settled on a universal form of electronic banking.

    I praise the courage of the Kenya government for staying out of the way; however, we can’t compare apples with oranges. We operate in a much different economy than that in Kenya. Aren’t governmental regulations that a necessary evil of a healthy prosperous economy?

    References:
    http://www.economist.com/blogs/economist-explains/2013/05/economist-explains-18

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  4. In my view life is all about courage no matter whom and which situation, it’s important to show courage in life. I do trading and this is a business where we definitely need courage in order to succeed. I work in Forex where there is a lot of courage needed, but with OctaFX broker which is a powerful company having lovely conditions which includes low spreads from 0.2 pips, high leverage up to 1.500 while there is also massive rebate program that helps me earn 15 dollars profits per lot size trade including losing one, so that helps me handle things.

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