Wednesday, December 30, 2015

The M-Pesa is the model for future digital currencies


A misconception about digital currencies (or "crypto-currencies") is that they will be adopted first in the developed economies of the world, those with the technological financial "infrastructure" already in place to enable wide adoption of a digital currency.  The irony of digital currencies (which, because they are based solely on mathematics, are very technical) is that their adoption won't come from tech-savvy people (or countries). It's going to be in the third world.  The M-Pesa was proof of that principle, because 1) it is used like cash, 2) like cash, it is easy to use.

The M-Pesa was introduced in Kenya in 2007.  Since then (in a mere 8 years), 2/3 of all adults in Kenya have used it.  And wrap your brain around this:  25% of Kenya's gross national product is now in the form of M-Pesa transactions.

 
And, here's the real thing:  the rapid adoption of the M-Pesa didn't come because Kenyans are tech-savvy; far from it.  It happened because nothing more technical than a smartphone app is required to use it.  Like cash, you store your M-Pesa in your wallet, which is, in nearly every case, a smartphone.  Most M-Pesa users have no bank account. They are their own banks. That's the whole reason digital currencies exist ... so that we can all be our own banks.

Of course, digital currencies will not be widely-adopted until nearly everyone carries a smartphone.  Oops, that's already happened!

 
It's not futuristic.  It's now.