NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, April 18, 2014

It’s a painfully First World problem: Splitting dinner with friends, we do the dance of the seven credit cards. No one, it seems, carries cash anymore, so we blunder through the inconvenience that comes with our dependence on plastic. Just as often, I encounter a street vendor or taxi driver who can’t handle my proffered card and am left shaking out my pockets and purse.

When I returned to the United States after living in Nairobi on and off for two years, these antiquated payment ordeals were especially frustrating. As I never tire of explaining to friends, in Kenya I could pay for nearly everything with a few taps on my cellphone.

Every few weeks, I’d pull cash out of my American bank account and hand it to a contemplative young man stationed outside my local greengrocer. I’d show him my ID and type in a PIN, and he’d credit my phone number with an equivalent amount of digital currency. Through a service called M-Pesa, I could store my mobile money and then, for a small fee, send it to any other phone number in the network, be it my cable company’s, a taxi driver’s, or a friend’s. Payments from other M-Pesa users would be added to my digital balance, which I could later withdraw in cash from my local agent.