Designing Mobile Money Services: Lessons from M-PESA

Abstract

M-PESA, the Kenyan mobile money service, has seen exceptional growth since its introduction in March 2007. Six million customers have registered with the service (see Figure 1), which represents nearly half the customer base of Safaricom, the mobile operator that launched M-PESA. This is a level of penetration in the mobile base that no other mobile phone-based service has achieved, outside of voice and text messaging. The figures for person-to-person (P2P) transfers are equally impressive: over USD 1.6 billion (120 billion Kenyan Shillings [KSh]) worth of such transfers have been made through the M-PESA system. Its agent network has grown in parallel with the customer base, and the service can be accessed at nearly nine thousand retail outlets nationwide, in both urban and rural areas.M-PESA facilitates a variety of financial transactions through the mobile phone. To access its services, individuals must register at an authorized M-PESA retail agent outlet. They then get an individual electronic money account that is managed by Safaricom, which in turn deposits the full value its customers store in M-PESA accounts at a pooled account in a regulated bank. Thus, the issuer of M-PESA accounts is Safaricom, but the value in the accounts is entirely backed by highly liquid deposits at a commercial bank. Customers can use their mobile phones to transfer money to both registered and non-registered users, check their account balance, pay bills, purchase mobile phone credit, and transfer such credit to other users. They can also make deposits and withdraw cash from their M-PESA account by visiting an authorized M-PESA agent.M-PESA is not the only mobile money service to be launched in Africa, but it is the most successful. For example, South Africa's WIZZIT has managed to attract 250,000 customers in more than four years of operation. Neighboring Tanzania launched its own version of M-PESA in April 2008, but it has only recently crossed the 100,000 customer mark. So why has this service grown so rapidly within the Kenyan context?

Mobile Money: Communication, Consumption and Change in the Payments Space

“…M-PESA is a mobile-phone money transfer service using text-messages and a network of retail agents as cash in/cash out points (Mas and Morawczynski, 2009;Jack and Suri, 2011). In the Philippines, people remit money to family members on remote islands through a similar service called Globe GCASH, used by over two million.…”

Inclusive Financial Markets: Is Transformation Under Way in Kenya?

“…However, research with users soon identified a clear need related to sending money home and this has been the core message through which it has been promoted-i.e. as a remittance service (Mas and Morawczynski 2009). After registering with an M-PESA agent, the user gets an electronic account issued by Safaricom in which they can store e-value which is denoted in units equivalent to Kenyan shillings.…”

From street to satellite: Mixing methods to understand mobile money users

“…It is viewed as one of the most novel innovations of mobile media platforms, as it allows people to store and send small amounts of money at low cost from their own mobile phones using SMS (Maurer 2012;Ratan 2008), without the need for a bank account, Internet connection, or a smart phone. Since it was first developed, mobile money has been touted as a fast and convenient alternative to expensive remittance services (see Donovan 2012;CGAP 2009), as a way to "bank the unbanked," and as a "product for the poor" Maurer 2011;Mas and Morawczynski 2009) for the three-quarters of the world's population who lack access to a formal bank account (World Bank 2012).…”