The Rise of Mobile Money and Bitcoin in Africa

Date Published
March 11, 2021
Written by
Marvin Coleby
Reviewed by

We're here to talk about why mobile money users in Kenya buy, store, and access Bitcoin. I've been exchanging cryptocurrencies for mobile money forms of payment since about 2017, primarily in Kenya - where half of the country's GDP passes through mobile money. It's become significantly easier to exchange BTC and other assets like USDT for mobile-money based cash. It used to be all about peer-to-peer networks, and eventually companies started to offer the same service. In this blog, we'll be looking at mobile money in Kenya, where this form of payment is possibly the most advanced in the world.

Mobile Money in Kenya

Since 2017, the growth of applications and infrastructure has made it a lot easier for mobile money users to buy, sell, and store cryptocurrencies directly from their phone. Mobile money is a form of payment that allows people to receive, store, and make cash payments through their mobile devices. When someone registers a SIM card for a number with a telecommunications provider - they can usually register for a mobile money service for that number. From there, you can use mobile money for pretty much anything. For example, school fees, dog-care fees, utility bills, and loans can be paid by pressing just a few buttons on your phone.

Kenya is the most advanced network of mobile money across the entire African continent. Mobile money may be a convenient form of paying for goods and services but the networks for mobile money are controlled by highly centralized networks and corporations. For example, even though almost half of Kenya's GDP passes through mobile money, all of it happens using M-Pesa, a mobile money technology built and administered by Safaricom (Ticker: SCOM). Over 99% of mobile money transactions in Kenya happen using Safaricom M-Pesa. That means that Safaricom sets the transaction prices (which are often way too high). For example, sending 100 Kenyan Shillings (about $1 USD), will cost you about 10 Kenyan Shillings (10 Cents), roughly 10% of the transaction costs. In addition, Safaricom controls the creation, issuance, and suspension of M-Pesa accounts. As a result, mobile money rails in Kenya are highly centralized and that's in a country where its currency hit a new low against the USD and the availability of investment assets is relatively low from within the country. 

This means that pretty much everyone using mobile money is losing enormous financial value through high transaction fees from a centralized company, and the depreciating value of the Kenyan Shilling. Even still, we continue using mobile money everyday, multiple times a day because it's convenient.

The Use of Cryptocurrencies

Luckily, platforms are popping up that are now making it just as convenient to exchange Kenyan Shillings and mobile money for BTC, ETH, USDT, and other crypto-based assets. Most Kenyan users can trade crypto for mobile money or mobile money for crypto via peer-to-peer transfers and applications like Bitlipa, Kotani Pay or Binance. Since most of the trades arguably happen through WhatsApp conversations and private addresses, the true volume of mobile money for crypto transfers is still unknown. So, it's pretty straightforward. M-Pesa and the Kenyan Shilling only accelerate the depreciating value of my money. Bitcoin and other crypto assets help me appreciate my money. Therefore the major problem that the crypto to mobile money rail solves is the ability for everyday people to buy, store and sell assets to appreciate the value of their money.

This is important for two reasons: people can use Bitcoin as a store of value and we're moving closer to mass market adoption. The first reason is more obvious: people can now appreciate their money by conveniently accessing cryptocurrencies through their mobile phone and digital payments. This is especially convenient right now since neither the government nor Safaricom have yet to implement policies or regulations to control the flow of mobile money to crypto, and crypto to mobile money (more on that below). The second reason is less obvious: it may take a while for governments to regulate and control this space. In the meantime, the problems that Bitcoin solve are so great that product market fit for Bitcoin will happen faster in mobile money based communities than they will in communities that rely on heavier banking infrastructure like credit cards and bank wire transfers. There are now over 50 million people in Kenya that can access the cryptocurrency market with their cell phones and mobile money. That's a lot of investments and transactions that will push the market cap of BTC and other cryptocurrencies to new heights.

The Future of Bitcoin in Kenya

The only thing missing for Bitcoin and other cryptocurrencies to reach product market in Africa is education and scale. Applications need to reach scale with clear education to get users to understand the importance of holding digital gold, Bitcoin. Once we get there, there's no stopping the simplicity of users using convenient mobile money to execute orders on cryptocurrency networks. And that's just Kenya. Mobile money is being deployed across all of Africa. Recently, Ethiopia,  which is a country with a population of over 100m people, announced the introduction of mobile money. In my opinion, African economies are quickly going to become the major catalyst for the mass global adoption of cryptocurrencies like Bitcoin and Ethereum.

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Marvin Coleby

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