M-Pesa Was Already There

What a SIM card in Nairobi taught me about the payment war Silicon Valley thinks it's still fighting

I bought a SIM card at Jomo Kenyatta International Airport. The shop sits right there in arrivals, past customs, before the exit. Five minutes. Passport in, Safaricom SIM out, slot it into whatever phone you carried out of Heathrow.

The woman behind the counter asked if I wanted M-Pesa.

Sure, I said. Why not. She set it up while I stood there. A PIN. A confirmation SMS. Done. I needed to call my tour operator. That was the mission. M-Pesa was just the thing that came with the SIM.

Twenty minutes later, a driver arrived. We moved into residential Nairobi — side streets, gated houses, walls topped with razor wire, dogs in some of the yards. I was trying to get GPS tracking working on my phone and couldn’t tell if this was standard Nairobi or just the particular street. I was leaving for the Mara in the morning. I didn’t dwell on it.

The booking

Finding a safari as a solo traveler is a logistics problem. You need to get tagged onto an existing group, or the price becomes irrational. I’d spent the previous week emailing operators. One woman’s replies came back fast and complete — she answered questions I hadn’t thought to ask. She found me a slot as the eighth person in a van heading to the Masai Mara.

Payment was through M-Pesa. I punched in her number. Typed the amount. Confirmed with my PIN. A receipt arrived by SMS. The whole exchange took less time than logging into my UK bank account.

I didn’t realize this was unusual.

What 17 million people already know

Consider what Safaricom reported in their most recent earnings: 17 million active M-Pesa users. Not projected. Not targeted. Current. Seventeen million people moving money through their phones, through a service that launched in 2007 — six years ago. Last year, those 17 million people pushed $24 billion through the platform. In a country with a GDP of roughly $37 billion.

I’m writing this in March 2013. In San Francisco, Stripe is two years old. Clean API, good product. But it processes payments between companies and customers who already have bank accounts and credit cards. Square launched in 2009 — Jack Dorsey’s other company, currently valued at $3.25 billion — and it still can’t crack small merchant adoption. Walk into any small shop in the United States and ask if they take Square. Most don’t. Venmo exists. Your friends in New York use it to split brunch. It requires a linked bank account.

None of these work if you don’t have a bank account.

That’s the detail the conversation keeps skipping.

Jackson

My guide in the Mara was named Jackson. Mid-forties, from a village outside Narok. He knew every bird by sound. He carried two phones — one for calls, one for M-Pesa, though most people just use one.

Every few days, Jackson sent money home to his wife. Punched in her number, confirmed the amount. She received a notification and walked to the local agent — a small kiosk that also sold airtime and Coca-Cola — and pulled out the cash.

I watched him do this at a roadside stop while I was buying water. The water cost 50 shillings. I paid with cash because I had cash and because I was a tourist who hadn’t thought about it. The woman selling the water had an M-Pesa till number printed on a piece of cardboard taped to her stall.

A piece of cardboard.

On the drive back to Nairobi, Jackson told me he’d paid his children’s school fees through M-Pesa. Term fees, uniforms, everything. His wife received the money, paid the school. No bus into Nairobi. No queue. No forms.

I asked if he had a bank account. He said yes, technically. The bank was in Nairobi. He went there maybe twice a year. M-Pesa was the bank he actually used.

The canyon

Here’s what I keep thinking about. I follow tech news. I read TechCrunch and Hacker News. I have opinions about payment APIs. I know which Y Combinator startups are interesting. And until I landed in Nairobi, I had almost no idea that M-Pesa existed at the scale it operates.

Seventeen million users. Seventy percent of Kenyan households. $24 billion in annual transactions. This is not a pilot program. This is not a startup that raised a seed round and issued a press release. This is infrastructure. It has been infrastructure for years.

The gap between what Silicon Valley talks about and what is operating in Nairobi is not a gap. It’s a canyon. The Valley is building payment tools for people who already have credit cards and checking accounts. Nairobi built a payment system for people who had neither, and it works. It works at the water stall with the cardboard sign. It works at the school fees office. It works when Jackson sends 2,000 shillings to his wife from a roadside stop at the edge of the Masai Mara.

Square is worth $3.25 billion and cannot get a fishmonger in Ohio to use it.

What infrastructure looks like when it works

The thing about infrastructure is that it disappears. When it works, you stop seeing it. In Nairobi, I noticed the gated houses. I noticed the traffic on Uhuru Highway. I noticed the Indian Muslim families in the arrivals hall, which surprised me because I hadn’t expected to see so many. But the financial system running on every phone in the country — the mechanism that actually moved money through the economy — I walked right past it.

Until someone at a SIM card counter asked if I wanted M-Pesa.

I’m back in London now. This morning I tried to log into my bank account. It took four minutes because I’d forgotten my security answers and had to reset them. The transfer I want to make will clear in two working days.

Two working days.

Jackson’s wife collected the money he sent from a roadside stop in under four minutes.

There is a conversation happening in tech right now about mobile payments. About who will win. About whether Apple or Google or some new YC batch will figure out how to make money move on phones. The conversation assumes this is an unsolved problem. It assumes the solution will come from San Francisco or Palo Alto.

The solution already exists. It has 17 million users. It processes $24 billion a year. Most of the people having that conversation have never heard of it.

M-Pesa was already there.