Before I go any further, I need to clarify some things:
First and foremost, Bitcoin and Mpesa are not the same technology. While the former is a digital currency, the latter is a mobile platform for transferring fiat money in an electronic form.
Furthermore, Bitcoin is used nearly in every country around the world while Mpesa is a success story in only a few countries. Currently, the mobile transfer service is found in Kenya, Afghanistan and Tanzania. It has also been launched in Egypt, South Africa, Fiji, India, Mozambique, Lesotho and Romania.
And, perhaps, the difference that stands out the most is the fact that Mpesa is a venture by commercial entities, with the British multinational telecommunications company, Vodafone, being the principal player.
Bitcoin, on the other hand, is a community-run peer-to-peer open source payment system, with no individual entity claiming ownership.
That said, there are many similarities that can be drawn between the two payment systems. And several articles have come up in the recent months exploring this particular topic, including one published on the June 9th, 2014 by the Business Insider.
Nevertheless, my focus here is not on which payment system is doing better than the other but pointing out that both technologies are leading money to the same future.
Perhaps it is important to mention at this point that I am Kenyan and using Mpesa is part of my daily life. I pay for my electricity bill, internet service, dinner at a restaurant and shopping at the supermarket using my mobile phone.
A joke is often told in Nairobi that you will know someone is Kenyan in New York or London if he stops you on the street to ask you where he can find an Mpesa agent nearby.
Of course, we are not that ignorant, but that joke shows how deep Mpesa is rooted in our daily lives.
For us, there is no life without Mpesa. And when there is a system failure for even five minutes, everything comes to a standstill in Nairobi.
At one point, there was a debate online on how Mpesa could turn out to be a national security nightmare if someone turned off the servers.
Let me give you some numbers to elaborate this: Kenya has a total population of slightly over 40 million people. And there are about 17 million active Mpesa accounts.
That translates to over 70% of the adult population using Mpesa. In fact, 43% of Kenyan GDP passes through the mobile payment system.
Yes, those numbers are staggering.
How does Mpesa work?
In order to start using Mpesa, you need to register your Sim card with one of the over 40,000 Mpesa agents spread across the country. For this, you will need some personal identification document such as a National ID card or passport and that helps the company meet the Know Your Customer (KYC) requirements.
The process takes less than five minutes after which your mobile number becomes your account number and the phone your wallet. Anyone with Mpesa can send money to your mobile number and you too can send out money to other mobile numbers.
It is still possible to send money to mobile numbers that are not registered with Mpesa but at a cost higher than the standard rates.
Where to load or unload your Mpesa account?
In order to load your Mpesa account, you have to give cash to an agent who transfers an equivalent amount of electronic cash into your phone.
Agents are found in every street you turn in towns and cities. You are almost guaranteed to find one even in the most remote village in the country. They can be in informal kiosks by the roadside or as part of customer service in a large chain store.
Even though commercial banks at one point lobbied authorities to slow the growth of the mobile money transfer service, over time they have learnt to coexist with the technology.
In fact, you can now withdraw cash from your Mpesa account using a bank ATM as an agent. The ATMs have agent identification numbers attached to them. You will key in these numbers onto your phone in order to prompt the machine to give you cash.
What is the technology behind Mpesa?
Mpesa does not require fancy smartphone to work. A GSM phones that can call and text is good enough. This is because you will only be literally texting money around.
The phone uses the Unstructured Supplementary Service Data (USSD) technology to connect to the service providers servers for execution of demands. For this purpose, all SIM cards provided by Safaricom, the mobile company behind Mpesa, come with SIM Application Toolkits (STK) that are preloaded with the Mpesa menu.
How secure is Mpesa?
Of course, security is relative but I can confidently say Mpesa is very secure. I have never heard of anyone who lost their money; unless they fell for conmen and send the money themselves.
For someone to empty your phone wallet, he needs your PIN and physical access to it.
And for any transaction at an agent’s place, you need the SIM card, your ID card/passport and PIN, which is like your private key.
Other services that have arisen with Mpesa
Apart from money transfer services other products have arisen around Mpesa. These include health insurance, loans and savings.
Merchants are given special accounts to which their customers pay with Mpesa. The system generates a code for every transaction which you can use as proof of payment.
Few points of sale in Kenya exclude Mpesa pay bill number.
Bottom line; even though these two payment systems are diverse in many ways, it is easy to pick out elements of similarities between them.
