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Developments in Mobile Technology and the Emergence of Mobile Money

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Abstract

This chapter analyses the development of the mobile phone and how this has uniquely led to the success of the mobile money service in sub-Saharan Africa. It provides a brief overview of the development of the telephone and the challenges faced by the landline in sub-Saharan Africa. The chapter looks at how mobile network operators developed a revolutionary solution to the remittance dilemma facing most parts of sub-Saharan Africa by developing the mobile service, as an add-on service based on the small messaging service. Using the framework developed in Chapter 2, it analyses mobile money and airtime credit as emerging forms of money. The chapter also examines how the mobile money payment system interacts with the national payment system.

Keywords

  • Landline
  • Mobile phone
  • Mobile money ecosystem
  • Remittance dilemma
  • Airtel Money
  • TNM Mpamba

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Fig. 3.1

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Notes

  1. 1.

    Also called sim card.

  2. 2.

    GSMA (2017) ‘Brief History of GSM & the GSMA’ (GSM Association), http://www.gsma.com/aboutus/history. 10 March 2017.

  3. 3.

    Ignacio Mas and Daniel Radcliffe (2011) ‘Mobile Payments Go Viral: M-PESA in Kenya’ 32 The Capco Institute Journal of Financial Transformation 169, p. 170.

  4. 4.

    GSMA (2017).

  5. 5.

    Jenny Aker and Isaac Mbiti (2010) ‘Mobile Phones and Economic Development in Africa’ 24 (3) Journal of Economic Perspectives 207, p. 4, https://www.aeaweb.org/atypon.php?doi=10.1257/jep.24.3.207. 13 December 2018.

  6. 6.

    Adeyemi Adepetun (2015) ‘Africa’s Mobile Phone Penetration Now 67%’ The Guardian, http://www.ngrguardiannews.com/2015/06/africas-mobile-phone-penetration-now-67/. 12 December 2018.

  7. 7.

    Anon (2015) ‘Why Africa Mobile Phone Penetration Rising to 79% by 2020 Is Good News’ (Amgoo Telecom Co., Ltd.), http://www.amgoo.com/blog/why-africa-mobile-phone-penetration-rising-to-79-by-2020-is-good-news. 12 December 2018.

  8. 8.

    Aker and Mbiti (2010), p. 3.

  9. 9.

    Porteous (2006), p. 3.

  10. 10.

    Jack and Suri (2011), p. 7.

    Mas and Radcliffe (2011), p. 170.

  11. 11.

    Mas and Radcliffe (2011), p. 170.

  12. 12.

    Ibid., p. 172.

  13. 13.

    CF Myers and LS Crosby (1953) Principles of Electricity Applied to Telephone and Telegraph Work (American Telephone and Telegraph Company, New York), p. 154.

  14. 14.

    Ibid., p. 165.

  15. 15.

    Of course, licences must be procured to be allowed to transmit radio signals.

  16. 16.

    Myers and Crosby (1953), p. 165.

  17. 17.

    Christopher Haslett (2008) Essentials of Radio Wave Propagation (Cambridge University Press, Cambridge), p. 1.

  18. 18.

    Ibid., p. 3.

  19. 19.

    Joel Young (2009) ‘Weird & Wireless: RF “Line of Sight”’ Electronics Weekly (21 October 2009), http://www.electronicsweekly.com/blogs/electro-ramblings/weird-wireless/weird-wireless-rf-line-of-sight-2009-10/. 10 March 2018.

  20. 20.

    John M Senior (1951) Optical Fiber Communications (Prentice-Hall International, Inc.), p. 6.

  21. 21.

    Ibid., p. 6.

  22. 22.

    Ibid.

  23. 23.

    Ibid.

  24. 24.

    Ibid., p. 7.

  25. 25.

    For a comparison between optical fibre and copper see: ‘Submarine Cable Map’ (PriMetrica, Inc., 2015), http://www.submarinecablemap.com/#/. 5 May 2018.

  26. 26.

    See ibid.

  27. 27.

    Gabriella Mulligan (2015) ‘Is Fibre Optic Cable Key to Africa’s Economic Growth?’ BBC Business News (London, 31 March 2015), http://www.bbc.co.uk/news/business-32079649. 9 May 2018.

  28. 28.

    ‘Mobile Phone Base Stations—How Mobile Phone Networks Work’ (Ofcom 2001), http://www.ofcom.org.uk/static/archive/ra/topics/mpsafety/school-audit/mobilework.htm. 27 March 2018.

  29. 29.

    Jon Agar (2003) Constant Touch: A Global History of the Mobile Phone (Icon Books, Cambridge) Chapter 4.

  30. 30.

    Ibid., Chapter 7.

  31. 31.

    Ibid.

  32. 32.

    Ofcom (2001) ‘Mobile Phone Base Stations—How Mobile Phone Networks Work’ (Office of the Communications Regulator, UK), http://www.ofcom.org.uk/static/archive/ra/topics/mpsafety/school-audit/mobilework.htm. 12 December 2018.

  33. 33.

    Ibid.

  34. 34.

    David Smith (2014) ‘Internet Use on Mobile Phones in Africa Predicted to Increase 20-fold’ The Guardian (5 June 2014), http://www.theguardian.com/world/2014/jun/05/internet-use-mobile-phones-africa-predicted-increase-20-fold. 10 March 2018.

  35. 35.

    ITU (2009) Information Society Statistical Profiles 2009Africa (International Telecommunications Union), p. 1, http://www.itu.int/dms_pub/itu-d/opb/ind/D-IND-RPM.AF-2009-PDF-E.pdf. 12 December 2018.

  36. 36.

    GSMA (2015) The Mobile Economy Sub-Saharan Africa 2015, https://www.gsmaintelligence.com/research/?file=721eb3d4b80a36451202d0473b3c4a63&download. 12 December 2018.

  37. 37.

    Smith (2014).

  38. 38.

    Giridaran Saubramaniam (2013) ‘Mobile Money: A Theoretical Study of Alternative Media of Exchange, and an Empirical Study with Respect to M-Pesa in Kenya’ (Toulouse School of Economics), p. 6, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2278679. 15 December 2018.

  39. 39.

    Mas and Radcliffe (2011), p. 170.

  40. 40.

    Ibid., p. 172.

  41. 41.

    Porteous (2006), p. 44.

  42. 42.

    Ibid.

  43. 43.

    Author’s personal knowledge.

  44. 44.

    Amrik Heyer and Ignacio Mas (2009) Seeking Fertile Grounds for Mobile Money (Mobile Money for the Unbanked, GSMA, London), p. 5, http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2012/03/fertile_grounds_mobile_money55.pdf. 14 February.

  45. 45.

    Ibid., p. 5.

  46. 46.

    Ibid., p. 10.

  47. 47.

    Patrick M Jost and Harjit Singh Sandhu (2003) The Hawala Alternative Remittance System and Its Role in Money Laundering (Interpol), p. 2, https://www.peacepalacelibrary.nl/ebooks/files/hawala.pdf. 14 February 2018.

  48. 48.

    Ibid.

  49. 49.

    Ibid.

  50. 50.

    Somik V Lall, Hyoung Wang and Thomas Munthali (2009) Explaining High Transport Costs Within MalawiBad Roads or Lack of Trucking Competition? (Policy Research Working Paper 5133, World Bank Publications), http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-5133. 11 March 2018.

  51. 51.

    Chris Chibwana (2010) ‘The High and the Hidden Costs of Banking in Malawi’, http://chibwana.com/2010/04/05/costs-of-banking-in-malawi/. 11 March 2018.

  52. 52.

    Geetha Nagarajan (July 2010) ‘Money in a Pot: Has OIBM Altered Savings in Rural Malawi?’ (Financial Service Assessment), http://www.fsassessment.umd.edu/notes/savings-rural.html. 11 March 2018.

  53. 53.

    Kelvin Chaguza (2017) ‘Opportunity International Bank of Malawi (OIBM) to Trim Its Staff This Year’ Face of Malawi (26 January 2017), http://www.faceofmalawi.com/2017/01/opportunity-bank-of-malawi-oibm-to-trim-its-staffs-this-year/. 10 March 2018.

    FMB ‘First Merchant Bank to Acquire Opportunity International Bank of Malawi’ (27 June 2017), http://www.fmbmalawi.com/first-merchant-bank-to-acquire-opportunity-international-bank-of-malawi/. 18 July 2018.

  54. 54.

    Which has now rebranded to First Capital Bank.

  55. 55.

    Legislation to enable national identification system was passed: National Registration Act (Malaŵi 2010), but efforts to operationalise it only started in 2015—Malaŵi Government (2015).

  56. 56.

    Finscope (2014), p. 5.

  57. 57.

    Ibid., p. 2.

  58. 58.

    Anon (2014) ‘Rural Population in Malawi’ Trading Economics, http://www.tradingeconomics.com/malawi/rural-population-wb-data.html. 19 May 2018.

  59. 59.

    UNESCO (2016).

  60. 60.

    Chipiliro Kansilanga (2015) ‘Malawi Savings Bank Finally Sold’ Daily Times (2 July 2015), http://www.times.mw/malawi-savings-bank-finally-sold-2/. 20 July 2018.

  61. 61.

    ‘MoneyGram’ (MoneyGram International Limited), https://m.moneygram.com/mgomobile/site/costEstimator.html#CostEstimatorResults. 11 March 2018.

  62. 62.

    XE (2018).

  63. 63.

    MPC (2017) ‘Financial, Retail & Agency Services’ (Malawi Posts Corporation), http://malawiposts.com/finance.html. 10 March 2018.

  64. 64.

    Vince Kumwenda (2012) ‘Malawi Posts Corporation’s Fast Cash Money Transfer’, http://vincekumwenda.blogspot.co.uk/2012/05/malawi-posts-corporations-fast-cash.html. 23 February 2018.

  65. 65.

    Chitaka is a collective word (Cheŵa) all forms of magic tricks usually associated with stealing of money.

  66. 66.

    (2012) Study on Informal and Non-formal Rural Financial Services 2012 (Concern Universal Malawi), p. 13, http://concern-universal.org/wp-content/uploads/2014/07/CUMO-Study-of-Rural-Finance-Summary.pdf. 7 October 2018.

  67. 67.

    Although the agent low agent penetration is still perceived as a barrier that needs to be overcome.

  68. 68.

    For example, the remittance fee is K50 regardless of the amount for Mpamba.

  69. 69.

    Kihagi (2013). See also TNM (2017).

  70. 70.

    Mas and Radcliffe (2011). See also Aker and Mbiti (2010), p. 20.

  71. 71.

    Donovan (2012), p. 2653.

  72. 72.

    RBM (2015), p. 14.

  73. 73.

    Ibid.

  74. 74.

    Ibid.

  75. 75.

    RBM (2017), p. 1.

  76. 76.

    RBM (2015), p. 14.

  77. 77.

    Maurer (2012), p. 306.

  78. 78.

    Brendan Greeley (2013) ‘One Good Paper: Monopoly Power in Mobile Money’ Bloomberg Businessweek, http://www.businessweek.com/articles/2013-03-13/one-good-paper-monopoly-power-in-mobilelectronicmoney. 28 March 2018.

  79. 79.

    Hughes and Lonie (2007), p. 69.

  80. 80.

    Di Castri (2013), p. 15.

  81. 81.

    Ibid.

  82. 82.

    Mas and Radcliffe (2011), p. 171.

  83. 83.

    Donovan (2012), p. 2648.

  84. 84.

    A customer due diligence is however done.

  85. 85.

    George Ngigi, ‘M-Pesa Linked to Rise in Inflation’ Business Daily (14 February 2012), http://www.businessdailyafrica.com/M-Pesa-linked-to-rise-in-inflation/-/539552/1327538/-/13rogmr/-/index.html. 28 March 2018.

  86. 86.

    Ibid.

  87. 87.

    Beth Jenkins (2008) ‘Developing Mobile Money Ecosystems’ (Washington, DC: International Finance Corporation and Harvard Kennedy School), p. 21, http://ww.gsma.com/mobilefordevelopment/wp-content/uploads/2012/06/report_30_mobilemoney.pdf. 13 December 2018.

  88. 88.

    Hughes and Lonie (2007), p. 63.

  89. 89.

    Jenkins (2008), p. 5.

  90. 90.

    Ibid.

  91. 91.

    Maurer (2012), p. 308.

  92. 92.

    Ibid.

  93. 93.

    Reference to a common manner of keeping money safe in rural areas of Malaŵi.

  94. 94.

    ‘Bharti Airtel’ (Bharti Airtel 2017), http://www.airtel.in/about-bharti/about-bharti-airtel. 30 May 2018.

  95. 95.

    Di Castri (2013), p. 15.

  96. 96.

    ‘Airtime’ (2016) Cambridge University Press, http://dictionary.cambridge.org/dictionary/english/airtime. 27 June 2018.

  97. 97.

    Airtel (2016) ‘Me2U’ (Airtel, Malawi), http://africa.airtel.com/wps/wcm/connect/africarevamp/malawi/home/personal/voice-and-text/phone-services/me2u. 21 May 2018.

    TNM (2013) ‘Me2u Service’ (Telekom Networks Malawi), http://www.tnm.co.mw/index.php/me2u.html. 21 May 2018.

    Safaricom Call Theirs ‘Sambaza’: Safaricom (2017) ‘Sambaza’ (Safaricom, Kenya), https://www.safaricom.co.ke/personal/calls-sms/prepay/sambaza. 17 February 2018.

  98. 98.

    As where two persons are in a remote area far from any airtime vendor and one of them needs to top up his or her airtime.

  99. 99.

    Porteous (2006), p. 23.

  100. 100.

    Safaricom (2017).

  101. 101.

    Peter Day (2005) ‘Mutual Benefits of Profits from Poverty’ BBC News (4 July 2005), http://news.bbc.co.uk/1/hi/business/4648049.stm. 17 February 2018.

  102. 102.

    Airtel (2017) ‘One Network Countries’ (Airtel Ghana), http://africa.airtel.com/wps/wcm/connect/africarevamp/Ghana/Home/personal/premier/one-network/PG_One-Network-Countries/. 29 May 2018.

  103. 103.

    The MO6262 is a mobile platform service operated by the National bank of Malaŵi. Almost all banks now have a similar service that extends the bank account to the mobile phone platform.

  104. 104.

    This may not be necessary true, however, in the age of Wi-fi technology and for the so-called smart phones which are able to connect to this technology and still operate, on a reduced level though.

  105. 105.

    Porteous (2006), p. 23.

  106. 106.

    Ibid.

  107. 107.

    Gunnar Camner and Emil Sjöblom (2009) Can the Success of M-PESA Be Repeated?A Review of the Implementations in Kenya and Tanzania, pp. 7–8, http://emil.sjoblom.com/pdf/M-Pesa_implementations_Ke_Tz.pdf. 15 December 2018.

  108. 108.

    M-Pesa is short for Mobile Pesa. Pesa is a Swahili (spoken in both Kenya and Tanzania) word for money. M-Pesa then directly translates to Mobile Money.

  109. 109.

    Camner and Sjöblom (2009).

  110. 110.

    Porteous (2006), p. 23.

  111. 111.

    Personal experience having been an agent before, at Chancellor College in Zomba (2006–2008).

  112. 112.

    Porteous (2006), p. 23.

  113. 113.

    James M Kenani, Stan G Kaunda and Chiyembekezo Chafuwa (2014) ‘Taxation Policy and Performance in Malawi Since Independence’ (Inaugural ECAMA Research Symposium, Lilongwe), http://www.slideshare.net/IFPRIMaSSP/taxation-policy-and-performance-in-malawi-since-independence-by-sg-kaunda-j-kenani. 17 February 2018.

    Porteous (2006), p. 24.

  114. 114.

    Kelley Jr (1999), p. 22.

  115. 115.

    In the recent criminal case of R v Kumwembe et al. Criminal Case No. 65 of 2013 (Lilongwe Registry), the High Court convicted the accused persons based on evidenced that was mainly provided by a mobile network provider.

  116. 116.

    Heeks (2012).

  117. 117.

    Ibid.

  118. 118.

    Camner and Sjöblom (2009), p. 3.

  119. 119.

    Jenkins (2008), p. 11 quoting Fundamo CEO Hannes van Rensburg.

  120. 120.

    Ibid., p. 12 quoting Hans Wijiyasuriya, CEO of Sri Lanka’s Dialog Telekom.

  121. 121.

    Ibid., pp. 13, 15.

  122. 122.

    Mas and Radcliffe (2011), p. 177.

  123. 123.

    Ibid.

  124. 124.

    Ibid.

  125. 125.

    Jenkins (2008), p. 7.

  126. 126.

    Porteous (2006), p. 31.

  127. 127.

    Ibid.

  128. 128.

    Heyer and Mas (2009), p. 13.

  129. 129.

    Ibid.

  130. 130.

    Ibid., p. 15.

  131. 131.

    Ibid., p. 13.

  132. 132.

    Subramaniam (2013), p. 7.

  133. 133.

    Ngigi (2012).

  134. 134.

    Gantala Hawaiju (2013) The Impact of Mobile Money Transfer Technology (Clknet Policy Brief No. 12), http://docplayer.net/14873424-Curriculum-vitae-giuseppe-travaglini.html. 11 November 2018.

  135. 135.

    Di Castri (2013), p. 10.

  136. 136.

    Ibid.

  137. 137.

    CPSS (2012), p. 58.

  138. 138.

    Maurer (2012), p. 306.

  139. 139.

    Ibid.

  140. 140.

    William Jack, Tavneet Suri and Robert M Townsend (2010) ‘Monetary Theory and Electronic Money: Reflections on the Kenyan Experience’ 96 (1) Federal Reserve Bank of Richmond Economic Quarterly 83, p. 89, https://www.richmondfed.org/publications/research/economic_quarterly/2010/q1/townsend. 15 December 2018.

  141. 141.

    Heyer and Mas (2009), p. 9.

  142. 142.

    Ignacio Mas and Amolo Ng’weno (2010) Three Keys to M-PESAss Success: Branding, Channel Management and Pricing (GSMA), p. 6, http://www.www.oneapigw.gsma.com/mobilefordevelopment/wp-content/uploads/2012/06/keystompesassuccess4jan69.pdf. 15 December 2018.

  143. 143.

    Camner and Sjöblom (2009), p. 4.

  144. 144.

    Ibid.

  145. 145.

    Robert R Stoll (1961) Set Theory and Logic (Dover Publications, New York) Chapter 1.

  146. 146.

    Ibid., pp. 4–5.

  147. 147.

    Mkoloma (2015), Mbekeani (2015).

  148. 148.

    Mkoloma (2015).

  149. 149.

    Ibid.

  150. 150.

    Ibid.

  151. 151.

    Ibid.

  152. 152.

    Ibid.

  153. 153.

    Klein and Mayer (2011), p. 14.

  154. 154.

    Ibid.

  155. 155.

    Ibid.

  156. 156.

    Jenkins (2008), p. 8.

  157. 157.

    Guidelines for Mobile Payment Systems (Malaŵi, 2011).

  158. 158.

    Tonny K Omwansa (2009) ‘M-PESA: Progress and Prospects’ Innovations 107, p. 121, https://profiles.uonbi.ac.ke/tomwansa/files/innov-gsma-omwansa.pdf. 1 December 2018.

  159. 159.

    Ibid.

  160. 160.

    Ibid.

  161. 161.

    For a similar scenario in Kenya, see ibid.

  162. 162.

    Section 12(1) Payment Systems Act (Malaŵi, 2016).

  163. 163.

    Jenkins (2008), p. 8.

  164. 164.

    Mbekeani (2015).

  165. 165.

    Mkoloma (2015), Mbekeani (2015).

  166. 166.

    Ibid.

  167. 167.

    Airtel claims to have ¾ share of the mobile market—Mkoloma (2015).

  168. 168.

    CPSS (2001), p. 5.

  169. 169.

    Ibid.

  170. 170.

    Ibid.

  171. 171.

    RBM (2015), p. 10.

  172. 172.

    RBM (2016) Monthly National Payments System Report: December 2016 (Reserve Bank of Malaŵi), p. 1, https://www.rbm.mw/PaymentSystems/GetContentFile/?ContentID=12148pdf. 17 February 2018.

  173. 173.

    Ali and others (2014), p. 8.

  174. 174.

    Brian Muthiora (2015) Enabling Mobile Money Policies in Kenya: Fostering a Digital Financial Revolution (GSMA), pp. 8, 12, https://www.itu.int/en/ITU-T/focusgroups/dfs/Documents/2015_MMU_Enabling-Mobilelectronicmoney-Policies-in-Kenya.pdf. 17 February 2018.

  175. 175.

    Di Castri (2013), p. 8.

  176. 176.

    Boon‐Chye Lee and Olujoke Longe‐Akindemowo (1999) ‘Regulatory Issues in Electronic Money: A Legal‐Economics Analysis’ 1 (1) Netnomics 53, p. 63.

  177. 177.

    Ibid.

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Madise, S. (2019). Developments in Mobile Technology and the Emergence of Mobile Money. In: The Regulation of Mobile Money. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-13831-8_3

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