M-PESA has become a great success. It was pioneered in Kenya by a mobile phone operator called Safaricom. M-Pesa has enabled Kenya to gain tremendous applause from the international community due to innovative technological advancements in the mobile banking and micro-finance industries.
It is used by more than two-thirds of Kenyan adults and supported by more than 85,000 agents and 50,000 merchants. M-PESA processes over 8 million transactions every day and has enabled financial institutions to offer new financial products over the mobile phone.
How Does M-Pesa Work?
M-Pesa (“M” for mobile and “Pesa” for money in Kiswahili) is an electronic payment and value storing system that is accessible through mobile phones. To access the service, customers must first register at an authorized M-PESA retail outlet, opening an account linked to their phone number.
It is accessed through an application on the SIM card in the mobile phone. It works on any phone, including very basic models commonly found across rural Africa. Customers deposit and withdraw cash from their accounts by exchanging cash for electronic value at a network of retail outlets referred to as agents.
M-PESA allows its users to:
- Deposit and withdraw money
- Transfer money to users and non-users
- Pay bills
- Purchase airtime
- Transfer money between the service and bank accounts
Most agents are very small. Some are entirely specialized and others are run as a side-line in a shop. Agents are paid a fee by Safaricom each time they exchange cash for M-Pesa value on behalf of customers. Once customers have money in their accounts, they can use their phones to transact. All transactions are authorized and recorded in real-time using secure text messages.
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