Why M-PESA should be scared of Apple Pay


There is a new product in the global town, Apple Pay; and this product is a big threat to a local big fish that we all care so much about, M-PESA. At the launch of the three Apple gadgets on 9th Sept 2014, gadgets that came with an old technology known as NFC, Apple also announced a virtual wallet product they called Apple Pay that will be relying on the NFC technology for payment of goods and services in selected stores starting with US. Apple Pay will be the wallet in which iPhone users will store their credit card information and then swipe their iPhones to execute payment. This particular technology has been in use for long by Android devices even in Kenya where people have paid for bus fares under Google-Equity Bebabay product.

As Kenyans we could not help but liken Apple Pay to M-PESA as both are strategic platforms for making virtual payments thanks to M-PESA’s payment product Lipa na M-PESA. The likening has then led to the debate of whether Apple Pay poses any threat to M-PESA or M-PESA can safely ignore Apple and continue to thrive. On one side of the debate there are those who hold to the opinion that Apple Pay is not in any way a threat to M-PESA. This side is led by Dickson A Otieno who wrote a piece in TECHISH titled Apple Pay No Threat to M-Pesa.

Dickson outlines several strengths M-PESA has against Apple Pay and these include the fact that M-PESA is not tied to a phone but a subscriber’s number. Dickson also points out that Apple Pay requires merchants to invest in NFC readers, a requirement that M-PESA doesn’t need. Thirdly, Dickson argues that there are very few iPhone owners in Kenya or in countries that M-PESA has significant market presence hence an iPhone based technology cannot threaten M-PESA.

Before I state what the other side of the debate say about Apple Pay’s threat to M-PESA, let me quickly address the points raised by Dickson by saying that NFC does not also rely to data inherent in the phone as the financial information is stored in virtual wallets like Google Wallet or Apple Pay so losing a phone won’t deter a customer from accessing his/her account upon replacement, Merchants don’t have to invest in expensive NFC readers as any smartphone with NFC capability can be configured to accept NFC based payments as is being used by the Bebapay buses in Kenya, and finally NFC is not an iPhone closed technology but has been available in Android devices since 2011. iPhone has just entered the bandwagon and is set to transform NFC based payments as shall be shown later in this article.

On the other side of the argument there are those who say Apple Pay is a threat to M-PESA and they are led by Kachwanya who tweeted:

If you follow that tweet you’ll realize that almost no one believes Kachwanya’s assertion that Apple Pay is threat to M-PESA. Arguments such as M-PESA is diversifying with products like M-Shwari etc convinced many that M-PESA has a strong footing to survive the threat of Apple Pay, if at all there is any threat. So let me take a stand in this debate and side with those saying that Apple Pay is a threat to M-PESA. After digging a little bit I have found facts to support the possibility that Apple Pay is not only a threat to M-PESA but a very big one for that matter. Allow me to explain the threats under the following sub-headings:

  • M-PESA works best in developing economies
  • Google’s short comings
  • The Strengths of Apple and USA
  • Advantages of an NFC based payment over M-PESA.


M-PESA works best in developing economies

After successful introduction of M-PESA in Kenya, Vodafone tried to introduce this service to other markets including Tanzania, Afghanistan, South Africa, India and others. M-PESA hasn’t been as successful in these other countries as it has been in Kenya but Tanzania, Afghanistan, India and a few others are catching up. South Africa is also trying to catch up after failing to have a significant impact since 2010. For the third time, M-PESA is being re-launched in South Africa taking into account the challenges it faced and lessons learnt.

The reason M-PESA did not succeed in South Africa is the failure to avail agents at residential places and minor towns – a key factor to the success of M-PESA in Kenya. This finding clearly tells us that M-PESA success in Kenya and Tanzania was the ability with which it can be made available in remote areas inaccessible to banks given the infrastructure a bank needs to put in place.

However, this model is not likely to work in the developed world where every citizen can easily access a banking service. In the developed markets, already every citizen can easily access the banks if not physically then via the almost free Internet provision or through the standard mobile banking offerings that are slowly creeping into the developing economies.

For the developed markets therefore, it is easier to sell a product like Apple Pay than M-PESA as Apple Pay doesn’t come as a competition to the banks but as a platform the banks can use to allow the banked to pay for merchandise by swiping their phones instead to credit cards. The advantages of being able to swipe a phone over M-PESA’s notorious keying of data will be shown under the section “Advantages of NFC based technology over M-PESA” below.

Google’s Shortcomings

An argument those in Dickson’s camp would frontier is that NFC hasn’t succeeded in making contactless payments popular yet phones like Nokia 6131 have had NFC since 2006  – then followed by Android devices courtesy of Samsung Nexus S  that reintroduced the technology as from 2010. They would say that it is apparent the population doesn’t prefer to use NFC technology as a mode of payment hence it is unforeseeable how Apple Pay will succeed where others on the same NFC platform have failed. A seemingly valid argument I must say.

I won’t be able to comment much as to why NFC based payments failed to take place under Nokia (at inception NFC was spearheaded by Nokia) but just put a case that probably the focus from feature phones to iPhones in 2007 and later to other smartphones a year or so later (iPhones and smartphones that totally ignored NFC) that led to the demise of Nokia and BlackBerry made NFC unpopular.

The uptake of the technology by early Android adopters like the Samsung Nexus S in 2010 hasn’t helped much for two reasons: 1. The payment ecosystem hadn’t been established and 2. Google doesn’t control the hardware market. It took long before virtual wallets that incorporate NFC technology was considered by the mobile manufacturers or even by Google itself. It is only at the release of Samsung Galaxy S3 that the big wigs in this industry started thinking deeply on how to make use of NFC as a serious platform for effecting contactless payment systems, and from then Google started to do a bit of marketing for its Google Wallet.

Even though Google has done some work to make Google Wallet be where it is today, the fact that it doesn’t have total control over gadgets on Android has been a setback. Android, being an open source Mobile Operating System, means that gadget manufacturers can also create their own competing products like the Samsung Wallet. This has worked to delay the implementation of the system across multiple stores and sectors since a merchant would need to enter into an agreement with each wallet provider in order to capture a significant client base.

Lack of a father like figure for NFC (looking at it from the virtual wallet angle) caused a laidback approach where no one has the drive to push NFC contactless payments technology to the mainstream; thus all players like Samsung, Nokia, Sony, Google, and the rest have only played a lackluster role managing to make NFC a sleeping dog.

The strength of Apple and USA

It is clear that what NFC needed is a driving force to make it popular. Now, a force to reckon with, has joined the NFC bandwagon and even before it can sell the first iPhone, it has got everyone talking about NFC. According to an article by Jozef Rynik of WBP Online, “marketing teams at big US lenders rushed to persuade potential customers to choose their cards as the default option under Apple Pay” immediately Apple Pay was announced.  Mashable also analyzed Apple Pay in an article dubbed, “5 Reasons Why Apple Pay Is the Sleeper Hit of the Apple Event” and stated, NFC “could be another instance of competitors stumbling with a technology, and Apple stepping in and showing everyone the way.”

There is a magic that Apple has, the ability to show everyone how to make an existing technology meaningful. If it wasn’t for Apple, smartphones wouldn’t be what they are today. Not only does Apple know how to design products useful for consumers (see what it did with the so called smart watch), it also has been able to acquire hundreds of millions of loyal fans that are willing to follow them wherever they lead, most of them being Americans.

The fact that most Americans are pro Apple is also an important value to the success of Apple Pay. If the millions of US Apple loyal fans fall in love with Apple Pay and incorporate Apple Pay as part of their lifestyle, then everyone else elsewhere in the globe would want to be as cool. Just as the iPhone managed to define who is who in the society, coolness will next be defined by the ability to make contactless payments through NFC – and as for Kenyans, NFC based payments will play a big role in defining whether one is a Luo or not.

The ball is now in Apple’s hands. I know they must have given NFC a serious thought before deciding to incorporate the technology in their ecosystem and since they see money in it, they will do all within their power to make it work, and people will use them. Then Google and Samsung will do what they have always done – make what Apple has transformed to be even better and cheaper and mainstream – and before long, everyone with a smartphone will be making contactless payments. And that’s when M-PESA will start seeing the first signs of threats posed by Apple Pay.

Advantages of NFC based payment over M-PESA

We have already mentioned that M-PESA has one important advantage in the developing economies, it is able to be deployed to remote areas where banks cannot dare set foot, but the world is generally moving towards an all developed economies at least technology wise. The world might not develop so fast that banks can find it easy to set foot in every remote village in Africa or Asia, but the populations in these countries will still take up cheap technologies like affordable smartphones which are available for prices as cheap as $50 and below – and those citizens of developing nations with affordable smartphones will want to use their smartphones in smart ways like swiping them to pay for grocery.

It has been mentioned by Dickson in his article linked to above that a disadvantage of NFC is the requirement that merchants need to install NFC readers to accept payments – but no, what a merchant would primarily need is to have an NFC enabled smartphone. This way, a customer who wants to make payment to the merchant e.g. mama mboga will only need to transfer the funds by touching his phone with that of mama mboga’s and done; funds shall have been moved from the customer’s NFC enabled wallet to the merchant’s NFC enabled wallet.

If compared to someone who intends to effect payment using M-PESA, the customer who uses NFC is able to save close to a minute if all factors are held constant. This is because the customer using a platform like Lipa na M-PESA has a lot of physical manual input to do before the payment can be executed. The Lipa a M-PESA customer will first need to open up his M-PESA menu, scroll to Lipa a M-PESA, select Buy Goods, enter the merchant’s till number after he has looked up for the till number, confirm twice or thrice that the till number has been entered correctly, press OK, enter the amount, confirm that the correct amount has been entered, carefully enter M-PESA PIN, confirm all of the above details once more, then send.

On the other hand, the NFC customer will go the merchant, touch the two phones, enter amount and probably PIN if the phone is not TouchID enabled, and done.

Finally, M-PESA is more old school as it based on SMS system to work. However, NFC has a future outlook as it is a communication technology that uses proximity of two smart devices. As people move forward, adoption of modern day smart technologies become the norm.

M-PESA can go smart too

M-PESA should be scared of Apple Pay but it shouldn’t panic. Here are my three point advices for Vodafone and Safaricom on how to adapt to the Apple Pay Challenge:

  • M-PESA should stop being dumb and go smart. I have written a whole article on this before and it can be found here. The other article titled M-PESA Bank can also help in expounding this point.
  • Safaricom’s desire to go NFC should speed up and probably think of letting M-PESA information be available to Google Wallet, Apple Pay and other NFC enabled wallets.
  • Vodafone should open up M-PESA so that developers can create supporting Apps to make M-PESA a competing global payment system.


You may join this debate on Twitter under the hashtag #ApplePayvsMPESA. Our twitter handle is @Kachwanya.


Welcome! Login in to your account

Remember me Lost your password?

Lost Password