M-Pesa, Kenya’s Mobile Wallet

Buying a coffee and paying with your mobile phone is more common in Nairobi than it is in London, even though the Smart-phone to person ratio vastly differ. Kenya’s Mobile-money system M-Pesa, launched by Safaricom in 2007 is used by over 17m Kenyans and around 25% of the country’s gross national product flows through it1.

M-Pesa is a small-value electronic payment and store of value system accessible from ordinary mobile phones. Setting up an account is easy and once an account is made transfers can be made to both M-pesa users and non-users. One can also pay bills and the affordability of the service has made it possible for the poor to open the door to formal financial services.

M-Pesa has several benefits compared to ordinary banks and other ways of saving and transfer money. Keep in mind that internet access is not certain in most parts of Kenya. Sending money far distances is very difficult without any means of doing so and that’s why Safaricom’s commercial saying ”Send money home” was so succesful. Money also cannot be stolen due to the need of an ID and a personal code during each transaction. Most importantly the service has reached out to many people without banking all over Kenya, which means that M-Pesa fulfills
the need for a low-cost transactional platform that enables low-income customers to meet a range of payment needs. I don’t need to go to the bank when I have the bank in my phone, says John Makusi Simiyu, a Nairobi businessman.

Dozens of similar systems have been launched in other countries before and after M-Pesa, none of the other systems have been as successful. M-Pesa is believed to be prosperous due to several factors. First of the dominant market position of Safaricom, requiring the citizens to use the same system. Second, the remarkable high cost of other ways of sending money and finally, during the post-election violence in the country in 2008 meant that those trapped in Nairobi received money through their phone and this established a base of users for later.

Now a days M-Pesa offer loans and saving products, saving further time and money (No bank-queueing in a town 30 kilometers away). One study2 found that 84 percent claim that losing M-Pesa would have a large, negative effect on them; which shows the service has become a part of the environment and economy in Kenya. Business models building on the M-Pesa foundation are not rare and it is spreading to other countries like Tanzania and Afghanistan – and was even launched in India this spring. So next time you are in a coffee shop in New Delhi, you might to able to pay with your phone.

1 As of May 2013
2 “Mobile payment go viral: M-PESA in Kenya” written by Ignacio Mas and Dan Radcliffe.

Johannes Eklind



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