M-Pesa is an innovative mobile money platform that enables the transfer of money as well as offers access to various financial services. Launched in 2007, the mobile money platform has surpassed expectations with an estimated $10 billion in transfers annually. Today there are over 17 million Kenyans using M-Pesa, and its related products for cash transactions.
Why was it Successful?
M-Pesa became popular in Kenya because:
- In developed countries, mobile money systems are usually linked to credit or debit cards. The opposite can be witnessed in Kenya where a large part of the population does not have bank accounts but have access to a mobile phone. M-Pesa made it possible for the unbanked to transfer and save money.
- M-Pesa made it easier for people to send money over long distances without worrying about theft or safety. Compared to transporting physical money through questionable and usually unreliable contacts.
- The platform proved cheaper and more convenient compared to other money transfer platforms.
Development of M-Pesa
M-Pesa was originally invented in England but introduced in the Kenyan market by Safaricom. At first the goal was to match micro-finance institutions and their clients through the platform. The platform would make it easy for low income earners to make loan payments and access other financial services. However after successful pilot testing, the concept was expanded to become a more general mobile money service.
It was a common known fact that many Kenyans operate between the rural and urban cities, meaning that those working in the cities support those back home. Getting money back to relatives ‘up country’ was a real headache. Safaricom based the M-Pesa business model on this. They then used mobile technology combined with a low-cost network of agents to create a solution to sending money to people around the country. It was relatively cheap, safe and reliable.
How it Works
M-Pesa works on a simple yet effective model. Once a customer has registered to the mobile service, they can deposit money into the system. They then hand the money to any of the 40,000 MP-Pesa agents situated across the country (usually located in shops and small businesses). The money is credited to their M-Pesa account. To withdraw the money one can visit an agent, who debits their account and gives them the cash. Money can also be transferred via text, by simply accessing the M-Pesa menu on the phone and initiating the transfer.
The success of MPESA has resulted in the system being replicated in different parts of Africa, and Asia. There are a number of MPESA related products in Kenya, a few are:
- Lipa Na Mpesa: It allows people to buy products at supermarkets, pay for services and settle bills with mobile devices instead of cash.
- M-Shwari: This is a partnership between the Central Bank of Kenya and Safaricom. It allows customers to save money and obtain loans, on their mobile devices.
- M-Banking Services: – These are banking services accessed on the M-Pesa platform. Some of the services are; fund transfers, loan requests, balance inquiries etc. The services offered and the means of accessing them differ from one institution to the other.
- Lipa Karo:-This allows the customer to pay for school fees through M-Pesa by depositing money in the system and sending it to the school. A specific code is assigned to each school and is part of the transaction details.
The popularity of M-Pesa has led to a rise in tech startups in Nairobi. The city is host to many startups creating innovative products to be used on the M-Pesa platform. Mobile money has endless possibilities and people will continue building secondary services around it.