M-Pesa – A Kenyan Success Story In Perspective

M-Pesa provides millions of Kenyans an easy and efficient mobile money service.  Its staggering growth rate and widespread adoption is beyond impressive.  So, what can M-Pesa teach us about mobile payment?  Perhaps not much.  The benefits to consumer adoption in Africa are very different to other markets and because of this, M-Pesa’s success is not necessarily transferable elsewhere.


Originally launched in 2007 by telecom giant Safaricom, it quickly became a preferred service due to the high number of Kenyans with mobile phones and its ability to be accessed anywhere. It is estimated that 15M people, or seventy percent of the adult population in Kenya uses M-Pesa.  Anecdotally, it is simply expected of both businesses and consumers alike to have M-Pesa to facilitate both commerce and social habits.


Why have so many Kenyans looked to M-Pesa for mobile payment?


Banking the Unbanked.  M-Pesa was originally launched for the purpose of providing basic payment and micro financing services for those that were unable to access them.  In Kenya, as in other emerging markets, basic banking products (e.g. current accounts, loans, credit, and debit cards) are not as accessible.  Bricks and mortar branches and cash points are not prevalent particularly in rural areas.  For this reason, it is estimated between only 16% and 21% of rural Kenyans are banked.  Urban dwellers also face hurdles to basic banking services.  Opening a current account can prove challenging as personal credit checks tend to be lengthy and account opening balance requirements are relatively high.  Furthermore, transactional fees are higher on these services than in mature markets.  Thus, a significant reason for M-Pesa’s proliferation is its tiered transaction fees that are significantly lower when compared to services provided by traditional banks.


Distrust in Kenyan Banks.  Distrust in banking is clearly at heightened levels on a global scale; however, it is arguably greater within Kenya stemming from the collapse of multiple Kenyan banks in the mid 1980’s and 1990’s.  M-Pesa offers an alternative to dealing with traditional banks as the service is sold through over 40,000 agents throughout the country.  Agents accept money for storage on M-Pesa accounts but customers also have the option of using the service in tandem with other bank credit and debit cards.


Security as a Selling Point.  Widespread adoption of mobile payment has suffered partly due to concerns around fraudulent activity either through loss of a phone or a compromised account.  On the other hand, many Kenyans have adopted M-Pesa because of security.  Storing money on an M-Pesa account is considered safer than carrying physical money.  Taxi drivers, for one, encourage payment by M-Pesa as this no longer necessitates carrying large amounts of cash on hand.


M-Pesa offers real value for its customers in enabling commerce.  It provides the industry with a case study in the successful creation and distribution of a mobile payment solution that millions of consumers now rely on.  However, solution providers should temper their excitement and not simply look to M-Pesa for a roadmap to success, as the reasons for consumer adoption in sub-Saharan Africa are unique to the market.


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About Kelly Martin 14 Articles
Having worked in both retail and commercial banking in the US, Kelly is passionate about product innovation in banking and payments. In her role as an Online Banking Product Manager for M&T Bank, Kelly roots her approach to product development in creating a rich and intuitive customer experience. The views and opinions expressed by Kelly are hers and in no way reflect those of M&T Bank.

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