Can M-PESA help eliminate the dominace of the dollar in global trade?

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  • 7 years ago
  • Posted: August 25, 2014 at 10:07 pm

Imagine if you could travel to Tanzania without having to buy the dollar – yes you can. But you can’t travel to Ethiopia without the dollar – or to Egypt, or China or to any other country that does not trade Kenya shillings in their Forex market.

Or imagine if you could buy goods/services from China or any Arabic nation without having to think in dollars. That you could trade in your local currency anywhere no matter where you went or where your goods/services came from.

Imagine if you could travel to Tanzania with your local phone in which your Safaricom SIM card that has M-PESA is inserted and roaming, approach the Tanzanian Vodacom M-PESA attendant, withdraw Shs 5,000 the same way you could  do when here in Kenya, the Vodacom attendant receives the message in her mobile phone but the value of the money to be withdrawn presented to her in Tanzanian shillings, and she hands you the Kshs 5,000 as Tshs 95,000.

Finally imagine that you saw this beautiful item in whose price is quoted in dollars, but you were able to buy that product simply by paying using Lipa na M-PESA – either from your phone or via the Internet.

If all these imaginations were true, then we could be able to at least reduce the influence of the dollar in global trade.

But for some reason the dollar remains the acceptable currency of trade – maybe because it is the world’s foreign reserve currency. Since the rest of the nations prefer to trade in, invest in, and keep their foreign reserves in the form of dollars, the dollar has enabled America have control on International trade in ways unimaginable for so many years, a scenario Liu Chang has asked to be changed. He wrote, “. . . it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”

The immediate question that would come to someone’s mind is, which currency should replace the dollar? For any other currency to effectively take the dollar’s place then that currency must be able to withstand any slight shakes in politics, economies or nature.

Can Bitcoin take the place of dollars in global trade? In an answer to the question, “Is Bitcoin the next Truly Global Currency?” Rana Foroohar gave a brief comment back in January this year that said:

…while Bitcoin may gain traction as a safe, easy to use retail currency in the digital era, I’m not so sure it will ever be a global currency a la the dollar or euro, one in which debt is issued or stocks traded. After all, it has no sovereign to guarantee its value and no central bank to regulate its ups and downs (which tend to be sharp).

There are however several voices that speak for the universality of bitcoin in the sense that, as it is right now, without any control from any government, and by the fact that it is a currency that is already accepted by numerous business across the globe, it is already a true global currency – what remains of bitcoin is for every single business unit globally to accept it as a mode of payment.

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As can be seen from Rana, the pessimists cite lack of sovereign oversight as the real challenge bitcoin will continue to face as it strive to evolves to become the solely accessible global currency, a challenge M-PESA doesn’t have since M-PESA has “a central authority—in this case, Vodafone or its subsidiaries” wrote Benard Lunn in ReadWrite – see M-PESA must be opened to non-vodafone networks sub-heading below.

M-PESA is not a currency hence should not be compared with bitcoin, one would argue. That’s right, but M-PESA is one of the few systems that exist today that are able to unify all currencies to become instantly interchangeable, and in the long run, transform them into this unified global currency. It is in this regard that I consider M-PESA as a force that can help eliminate the dominance of the dollar.

What M-PESA needs to do to influence global trade

Step 1: The obvious step M-PESA must do is to be present in every country, and that is a long call. Already M-PESA has presence in Kenya, Tanzania, Afghanistan, India, South Africa, Romania, Mozambique, Lesotho, and Egypt. Countries in which M-PESA must penetrate for it to make any significant contribution to global trade are Western European countries (European Union can come in handy in helping M-PESA penetrate the Western Europe), US, China, Japan, Brazil (and most of the central and South America countries), Nigeria, and Ghana. M-PESA, being a Vodafone product, can easily start operations in the countries that Vodafone has presence in.

Step 2: The next step that M-PESA must take is to allow for transference of money from any M-PESA account to any other M-PESA account globally. M-PESA can start doing this in countries in which it already has presence. For example, if someone has M-PESA with Safaricom, the same person should be able to directly send money to a Tanzanian who has M-PESA with Vodacom.

Step 3: Then the final step M-PESA must follow is enabling travelers to withdraw money anywhere in the world local currencies. For example, if I have money in my current Safaricom’s M-PESA and I travel to India, I should be able to withdraw Rupees from an Indian agent using my roaming Safaricom line. Interestingly, if M-PESA goes online, then roaming won’t be an issue as M-PESA could be carried out from the online portal.

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When the three steps are completed, then the gap created by having to deal in different currencies mediated by the dollar shall have been bridged.

M-PESA must be opened to non-vodafone networks

Vodafone must realize that containing M-PESA to vodafone alone limits the extent to which M-PESA can be adopted, even in countries like Kenya that M-PESA has done very well. In Kenya, it was reported that Safaricom had somehow agreed to license M-PESA to other mobile network operators like Airtel. If Kenya can be used as a pilot, it would be realized that opening M-PESA to other networks through a licensing agreement will  enable mobile money penetration reach every mobile phone user within a very short time, given the aggressive market campaign the telecos may jointly carry out to promote M-PESA. Read the M-PESA monopoly coming to mobile cash for further insights.

If M-PESA is not opened up to all players interested in providing M-PESA services, then, just as Benard Lunn of ReadWrite wrote back in June this year, M-PESA could become the next AOL. Lunn writes;

It’s up to Vodafone if it wants to avoid M-Pesa becoming the AOL of mobile money. Vodafone has more than 400 million customers worldwide, but that’s a small percentage of the world’s global mobile users. As of March, only 17 million of them used M-Pesa. Vodafone will never reach the billions of unbanked who need it if it limits M-Pesa to its own markets.

M-PESA must be smart to penetrate the developed markets

Last year I had written an article calling upon M-Pesa to stop being dumb and go smart. M-PESA might try as hard as it wants to offer mobile money services to Western Europe, the US and many other countries in the Americas but majority of mobile phone users in these countries prefer to use Internet based Apps – not USSD or the phone’s Network Service Application like the default Safaricom App that allows you to access M-PESA. Early this year, Techmoran reported that Safaricom was thinking of adding Near Field Communication technologies to be integrated with M-PESA via NFC enabled SIM cards to enable NFC based payments. This is one way in which M-PESA can be sold to the developed world.

For success of M-PESA in the global stage, it is important to seamlessly integrate M-PESA with bank accounts where not only can people transfer monies from M-PESA to their respective bank accounts but also ease the process of transferring money from bank to M-PESA – and what I’m thinking about is linking a bank account with a person’s M-PESA in the same way a bank account is linked to a debit or credit card; without the need to develop a separate M-PESA debit or credit card like Visa card. Since NFC technology is being thought of to be linked to M-PESA, then the mobile phone could be that debit or credit card.

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Lastly, M-PESA should be available online too. Although a significant number of people have called on Paypal to enable withdrawal of funds on Paypal via M-PESA the same way it partnered with Equity Bank, what however M-PESA needs to do is to be a PayPal competitor since the two services basically do the same thing albeit in different places: PayPal is purely an Internet payment and remittance service whereas M-PESA is purely an SMS based remittance and payment service via mobile phones. To compete with Paypal, M-PESA needs to open up an online portal through which subscribers can carryout their M-PESA transactions via the Internet.

Overcoming government controls

Just by imagination it is easy to see the ease with which global trade can be enhanced when a platform such as M-PESA is allowed to enable payments, instantaneously. But for the reasons that companies such as Apple or countries such as China have banned bitcoin, or for the reasons that countries like Pakistan or Venezuela have blocked direct remittance of money from their countries through whichever avenue (Western Union, Money Gram, Wire transfers etc etc), M-PESA may not be able to achieve the desirable global reach.

Paypal could be considered as an M-PESA equivalent whose realm of operation is the Internet. However, even Paypal has not been able to overcome some governments regulations or technological restrictions in countries like Afghanistan, Bangladesh, Cameroon, Central African Republic, Cote D’Ivoire (Ivory Coast), Democratic People’s Republic of Korea (North Korea), Equatorial Guinea, Gabon, Ghana, Haiti, Iran, Iraq, Lebanon, Liberia, Libya, Monaco, Moldova, Montenegro, Myanmar, Pakistan, Paraguay, Saint Lucia, South Sudan, Sudan, Syria, Timor-Leste, Uzbekistan and Zimbabwe as per this website.

The elimination of the dollar is a big dream

As you must have realized, the dream that one day M-PESA will help eliminate the dominance of the dollar is a big dream indeed – but this dream is not outside the reach of M-PESA. Maybe one day in the far/near future history will be written that a mobile money service once upon a time started in Kenya enabled countries to trade without worrying about foreign currencies, people traveled without visiting the exchange bureaus, and prices were no longer quoted in dollars.

This dream can however be realized if Vodafone sees the possibility and tailor M-PESA to achieve this dream; and the first thing Vodafone must do is to let M-PESA be used by every other mobile service provider anywhere – then allow M-PESA to be another visa card like platform.


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