June 25, 2014
Forget Bitcoin: There’s A Better Model For Mobile Money. It's called M-Pesa
Bitcoin has all the buzz right now. But there's another financial innovation that could have a far more meaningful impact on the lives of billion of people without bank accounts across the world. ReadWriteWeb reports.
In 2007, two years before the mysterious Satoshi Nakamoto wrote the original proposal for Bitcoin, Safaricom, a Kenyan telecommunications company effectively controlled by Vodafone, launched M-Pesa, a service that let anyone with an active cell-phone line send and receive money instantly.
“Pesa” means money in Swahili, and M-Pesa, short for mobile money, has become synonymous with money in Kenya. M-Pesa transactions accounts for 40 percent of the gross domestic product. It has spread beyond Kenya’s borders to South Africa, Afghanistan, India, and most recently Romania. It doesn't require smartphones; it works on the very basic so-called “feature” phones that are common in the developing world. If you can send a text message, you can bank with M-Pesa.
M-Pesa has enabled millions of the unbanked to emerge from subsistence living into the makings of a middle-class life.
Bitcoin is the answer that Silicon Valley is putting forward for the 70% of the world that is unbanked. It’s easy to understand why entrepreneurs and investors are charmed by the technical elegance and openness of Bitcoin, which provides both a decentralized system for transactions and its own form of stored value.
Therein lie two key differences between M-Pesa and Bitcoin:
M-Pesa works with existing national currencies, making it far simpler to withdraw and spend.M-Pesa is controlled by Vodafone, whereas Bitcoin is an open technology.
Could M-Pesa be the AOL of mobile money—set to become big for a brief period, only to be overtaken by more open technologies? here are four reasons why this way of thinking about M-Pesa could be wrong.
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