A Decade Behind Africa in Mobile Payments?

$96 billion credit card company Visa (NYSE: V) should be embarrassed that it is finally giving U.S. consumers a method for making mobile payments.  You have to ask why is a third World continent of Africa 5 to 10 years ahead of the United States which is the technology leader of the World?  Is this about monopolies Visa, Master Card (NYSE: MA) and American Express (NYSE: AXP) colluding to protection their turf?  Is this about carriers colluding with credit card companies to prevent competition?

These massive companies undoubtedly fear competition stealing their market share and would rather keep the business environment exactly the same in order to protect their merchant relationships.  A company like PayPal owned by (Nasdaq: EBAY) could soon become a formidable competitor to Visa, Master Card and American express.  Another company Square is also a disruptive player who could disrupt the competition.  However, wireless carriers, banks and the Government need to get out of the way and pave the way for smartphone users to make transactions on their phones.  In fact, there should be thousands of mobile payment infrastructure companies including companies like Google, Apple & Microsoft.  

NFC (Near Field Communication) is a secure mobile standard that carriers have finally agreed upon and allows a secure payment to flow from a phone to a credit card payment terminal.  This payment is secure in and encrypted.  Its not just about displacing payments from a plastic card to a phone.  NFC makes it easier to review credit card account information in real time.  It allows you to understand your balance and credit available.  Every transaction will be encrypted with a password so if someone steals your phone they will need to know your password in order to perform a transaction.

For Example: M-PESA developed by Vodafone 10 years ago launched commercially 5 years ago by the company’s Kenyan affiliate Safaricom.  M-PESA mobile payments (transactions capped at $500) electronic payment and store of value system accessible from ordinary mobile phones. Once customers have an M-PESA account, they can use their phones to transfer funds to both M-PESA users and non-users, pay bills, and purchase mobile airtime credit for a small, flat, per-transaction fee. The affordability of the service has been key in opening the door to formal financial services for Kenya’s poor.

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