Topic: Mobile money slowly turning East Africa into cashless society (Read 8146 times)

Individuals can just send money to each other without being an agent,

Here's an interesting development:

https://bitcointalksearch.org/topic/2013-07-08-memeburn-kipochi-brings-bitcoin-to-africa-through-m-pesa-252238

Kenyans will be able to send and receive Bitcoin and convert it to and from an M-Pesa balance. You can also buy and invest in Bitcoin. Though what stands out the most is probably the fact that the Kenyan diaspora will now compete with international transfer companies such as Western Union. Exchanging money will thus be made much cheaper as Bitcoin only charge US$0.04.
Kipochi works on all mobile phones, having SMS, USSD and HTML5 frontends, as well as a desktop computers

A central bank ceiling on over-the-counter dollar transactions at banks has sent Ghana's class of China-bound traders into street-side foreign-exchange bureaus that normally cater to fanny-pack-clad tourists. Chinese importers often show up just before flights back to China desperate to buy $100,000.

Here's a post from another thread that directly responds to this:

I've talked to a couple of start-up entrepreneurs - Pule Mmolotsi, who is testing out an Oyster-like card for public transportation in the country.
[...]
in the past two years there has been an interesting phenomenon in Africa - the proliferation of tech hubs and incubators.
[...]
There are now more than 50 tech hubs, labs, incubators and accelerators in Africa, covering more than 20 countries. In Nairobi, we have six.
[...]
if we had waited for the government to create the iHub in Kenya, we would still be waiting today.
[...]
Innovation comes from the edges, so it comes as no surprise that innovators are found in the margins. They are the misfits among us, the ones who see and do things differently.
[...]
The tech hubs in Africa provide a home for those with new and innovative ideas, create an atmosphere where they are encouraged to try new things, and most importantly are able to meet like-minded individuals they can grow with.

The system used in Africa is based on the GSM standard that lets the operator put simple menus on the users screen:

http://en.wikipedia.org/wiki/Unstructured_Supplementary_Service_Data

Well, Western Union isn't cheap either, but really, do we expect people to pick up something quite novel and challenging (where you have to care yourself for security and infrastructure, especially if you're a merchant) at such a premium?

Of course the added expenses in converting from cash through payment intermediaries like CashU will limit bitcoin's usefulness in the instances where that is needed.  But compare the costs to Western Union though and to other methods of sending money from one part of a country to another, or internationally within Africa or overseas, and this doesn't end up being such an uncompetitive rate.

Here's an example of why this matters:


 - http://pymnts.com/commentary/Tips-for-2012-Understanding-Payment-Behavior-of-African-Households-A-Vast-and-Untapped-Market/

That shows that more than half of remittances do not use mobile payments.

Few mobile payment networks support international remittance transactions being one reason for that.  
 - http://technology.cgap.org/2012/03/21/what-do-international-remittances-mean-for-mobile-money-cgap-releases-study-on-remittances

But bitcoins won't just be useful as an alternative to Western Union for remittance transfers for the continent.  They'll be useful for a wide variety of transactions -- they can be used to pay for a commercial shipment electronically so that the delivery driver isn't carrying large amounts of cash, for instance.  Bitcoins will be useful for travelers who wish to convert out of the currency in one country and then used to acquire local currency in the next.

So even with a high level of friction when buying bitcoins using CashU, once bitcoins are acquired they can circulate without being converted back to fiat outside the local community.  

This is sure to happen since anyone can function as an exchange.  This exchange function is one that has almost no barrier to entry and could be profitable for those who begin to offer this service.  The techies at the cyber-cafe are likely one example of where these first exchanges will occur  -- especially since that's where tourists are found.   Or those already operating as exchange agents might start participating as adding bitcoin to the mix is just a small additional effort.

Keep this in mind ... with each Western Union transaction sucking a minimum of 10% of the payment, and mobile payments in the 5% range for smaller payments (e.g., under $40 range), bitcoins when purchased through CashU even don't need to change hands twice before they've become a better value as a payment system than had the same amount of funds been transferred through the alternatives.

The key though is that previously there was no way to seed this.  This CashU option actually gives the ability for entrepreneurial individuals on the ground there to get bitcoins into their hands so that they have something to use to start trading.

Next what is needed are some stories of actual bitcoin commerce occurring.  For instance, there are many tech and business incubators on the continent  - a perfect place for bitcoins to begin circulating among a small group of willing participants who generally are among the early adopters and wouldn't entirely resist trying something new like this.  Here's an example:

 - http://www.meltwater.org/who-we-are/our-campus/

Now that Bitcoin Nordic accepts payments using CashU, which in turn accepts UKash vouchers for adding funds, bitcoins can now be purchased in quite a few more countries...

cashU is a prepaid payment service. To buy bitcoins using cashU you need to create a cashU payment account.
....

Price
Price will be MtGox USD 24 hour average +15% at the time of processing which is currently 8.721991 USD.

The business officially opened in early 2011 after receiving approval from the Central Bank of Nigeria.

Paga now employs 68 and has more than 42,000 Nigerian customers who can transfer money, purchase airtime credit, and pay bills with their cell phones using the system. Investors in the company include Timothy Draper, founder of global venture capital firm Draper Fisher Jurvetson

He dialed a colleague's cell phone number in Nigeria and punched in the amount of money he wanted to transfer to her from his Paga account, followed by his PIN number. After a few moments, a recorded voice confirmed the transaction, while a text message alerted his colleague about how much money had been sent. The entire process took about 35 seconds. There's no charge to pay bills or add cell phone airtime, but mobile money senders are charged a fee based on the amount transferred.

The company has a network of 550 agents, typically mom-and-pop merchants who already run grocery stores or pharmacies. Customers can go to those agents to deposit cash into their Paga accounts, and then conduct mobile transactions using those funds. The company also has a partnership with several Nigerian banks that accept Paga account deposits. So far, Oviosu said the average transaction size is modest, about 3,000 Nigerian naira, which is the equivalent of about $20 U.S.

You still need to load the thumb drive / SD card into a trusted network connected computing device to do transactions. I would prefer a stripped down phone over some PC anytime. And, a phone is a lot cheaper plus easier to operate. BitcoinSpinner can actually almost do this seamlessly. A village can share a stripped down android phone and each user has his own QR-code backup on paper. To do a transaction you restore your backup, do your transaction, and restore some empty account. Your private keys are only in memory until you restore the empty account. A "clear" button could be added to eliminate the last step.
Thoughts?

could the problem be solved with cold storage? like a thumbdrive with a wallet.dat file and some level of encryption?  A thumb drive could make a great vault for someone store their wealth cheaply and with a relatively high level of security in a third world country.