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A paper-thin technology could help millions — if it can topple a banking telecom giant.

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The promise of mobile money, which allow users to make payments with their cellphones, hasn’t much delivered in the United States. In this, it turns out that America trails years — eight years — behind another country: Kenya.

The mobile money app M-Pesa launched in 2007 and now, it says, has almost 14 million active users in Kenya — plus millions more across South Africa, Afghanistan and the rest of the globe. By 2012, the value of mobile transactions reached $18 billion, equal to about 41 percent of Kenya’s GDP. For those interested in emerging markets, M-Pesa has become a larger-than-life success story: It launched a hundred research papers and became a sort of holy grail for other telecom companies, which have tried — largely in vain — to replicate its model around the world.

But M-Pesa’s model may finally be spreading. Last year, Kenya’s Equity Bank introduced a new piece of technology that literally piggybacks off M-Pesa’s success. Called a “thin sim,” the paper-thin chip slips under a standard SIM card used in mobile phones by Safaricom, the telecommunications company that owns M-Pesa. Operating like a second SIM, the device will connect to its own cellular network to allow users to make instant money transfers, just like M-Pesa, but cheaper.

Those in the industry are watching closely, not just to see whether another player can finally shake M-Pesa’s dominance, but also because the technology could finally make mobile payments easier in other developing countries. If so, it could further blur the line between banking and telecom and potentially offer market access to the hundreds of millions around the world who have a phone but no bank account.

Among those who hope Equitel succeeds is Benjamin Mulgal, a university student whose parents send him money through M-Pesa — and who pays up to 110 shillings (about $1.22) in fees each time. “M-Pesa charges are a burden to me,” he says, but they earned the company $319 million in revenue over the last fiscal year, up nearly a quarter from the year before. Most came from customer-to-customer money transfers like the ones Mulgal gets from his parents. Equitel’s charges top out at 25 shillings. Transfers are free.

A man sending money through the mobile phone service called M-Pesa, in Kenya's capital, Nairobi.

A man in Nairobi sends money through the mobile phone service M-Pesa.

Source Tony Karumba/AFP/Getty

Also alluring for many of Kenya’s unbanked: the potential for credit. Last year Equity Bank’s loan portfolio topped $2 billion, with much of that cash chopped up into microloans to Kenya’s middle and lower-middle classes. But as with anywhere, Kenyans without a credit history generally aren’t eligible for a loan, and certainly not a sizable one. With Equitel, though, the bank can see how much money a client receives or spends in a given month — or note how frequently his account balance approaches zero — and use the data to establish a credit history.

Safaricom, which did not respond to interview requests, isn’t giving up without a fight. M-Pesa’s parent company has a history of beating back potential competitors, and when word of Equitel’s plan surfaced, it sought to ban the thin sim altogether, arguing that the device could threaten the security of customers’ data. In October, Kenya’s Communication Authority disagreed and green-lighted thin sim for a year, but Safaricom has appealed. The High Court threw out the case in May of this year, and the thin sim officially launched in July.

An employee helping a customer at an M-pesa shop in Nairobi.

An employee helps a customer at an M-Pesa shop in Nairobi.

Source Guillaume Bonn/Corbis

Though Equitel says it already has a million users, it won’t demolish Safaricom’s monopoly in one fell swoop, and it’s far too early to tell whether it can offer Kenyans the seamlessness M-Pesa has. So far, would-be rivals to M-Pesa have failed to find traction. And when it comes to payment systems, it’s not clear that a variety of players is necessarily better than a monopoly. Sellers might feel pressured to carry all of them, for instance, and that could prove costly for small-time merchants like vegetable vendors. “It can’t be economically viable to have so many companies doing the same job,” says Timothy Igathe, an industry observer. He thinks the market could bear only about four payment companies.

At the least, most in Kenya agree that two big players are better than one. As Equity continues its thin-sim rollout, it’ll put M-Pesa’s reputation as an isolated success to the test. Which doesn’t guarantee either of them will last through the long haul: Unlike Apple Pay, the thin sim and M-Pesa are designed primarily for users who don’t have smartphones. For now, that’s an asset in countries like Kenya, where one-third of new phones being sold can’t connect to the Internet or use apps. But as more Kenyans switch to smartphones, that may render both services — M-Pesa and Equitel — obsolete.

Anthony Langat contributed reporting to this piece.

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