Mobile payments impacting developing economies

In developing countries with limited financial services, unstable economic conditions and inferior internet penetration, mobile payment systems and mcommerce are increasingly becoming important parts of economic recovery. A recent report from the BBC details a mobile money transfer system in Kenya that began as a loan repayment system and has quickly grown into a mainstream financial service.

M-Pesa, a mobile wallet utility, has brought financial services to citizens in Kenya that have limited access to banking and other economic resources. By allowing users to essentially text money through SMS messages on their mobile devices, the mcommerce application is revolutionizing the country's economy.

Nick Hughes, one of the program's founders, told the news source the system began as a nine-month pilot that was subsidized by the UK government. Its intention was to create a safe system for basic loan repayments, replacing the need for banks, which only a small percentage of citizens could access. By the time the pilot had run its course, analysts realized customers were using the mcommerce tool primarily for money transfers, and its direction changed.

Throughout the world, there are at least 80 similar programs, Seema Desai from the Mobile Money for the Unbanked told the news source. In Kenya, more than 50 percent of the adult population is using the M-Pesa or another mobile money transfer system, the BBC reports.

John Makusi Simiyu, a Nairobi-based businessman, told the BBC the mcommerce program has drastically improved his ability to manage his company's affairs. In the past, he said, a broken down vehicle would take an entire day to repair because he would have to personally travel to the site to pay the mechanic.

"Today I don't need to do that. Just call me, tell me your problem and how much you need and I will text it through M-Pesa system. I don't need to go the bank when I have the bank in my phone," Simiyu told the news source.

Desai, director of the MMU, told the BBC mobile money transfers are likely to remain popular in developing countries, but may not catch on in developed nations. Instead, mcommerce will be used as a utility for purchasing goods and performing microtransactions, he said.

Recently, a joint venture by Verizon, AT&T and T-Mobile created Isis, a near field communications-based mcommerce program designed to facilitate mobile payments. While the program is only in the early stages of development, its goal to provide a system for purchasing goods through mobile devices reflects Desai's conclusion that mcommerce will likely focus on shopping and similar functions in developed nations.