M-Pesa
Encyclopedia
M-PESA is the product name of a mobile-phone based money transfer service for Safaricom
, which is a Vodafone
affiliate. It was initially developed by Sagentia
before transitioning to IBM
. The project was initially sponsored by the UK
government
Department for International Development (DFID)
in 2003–2007.
The initial concept of M-PESA was to create a service which allowed microfinance
borrowers to conveniently receive and repay loans using the network of Safaricom
airtime resellers. This would enable microfinance
institutions (MFIs) to offer more competitive loan rates to their users, as there is a reduced cost of dealing in cash. The users of the service would gain through being able to track their finances more easily. But when the service was trialled, customers adopted the service for a variety of alternative uses; complications arose with Faulu, the partnering microfinance
institution (MFI). M-PESA was re-focused and launched with a different value proposition: sending remittances home across the country and making payments.
M-PESA is a branchless banking
service, meaning that it is designed to enable users to complete basic banking transactions without the need to visit a bank branch
. The continuing success of M-PESA, in Kenya
, has been due to the creation of a highly popular, affordable payment service with only limited involvement of a bank. The system was developed and ran by Sagentia
from initial development to the 6 million customer mark. The service has now been transitioned to be operationally run by IBM Global Services
on behalf of Vodafone
, the initial 3 markets (Kenya, Tanzania & Afghanistan) are hosted between Rackspace
and Vodafone
.
s. M-PESA is operated by Safaricom
, a Mobile network operator
(MNO), which is not classed as a deposit-taking institution (such as a bank). Therefore, M-PESA may not be advertised as a banking service.
The service enables its users to:
The user interface
technology of M-PESA differs between Safaricom of Kenya and Vodacom of Tanzania, although the underlying platform is the same. While Safaricom uses SIM toolkit
to provide handset menus for accessing the service, Vodacom relies on USSD
to provide users with menus.
n MNO Safaricom
, an affiliate of Vodafone
, in March 2003. M-PESA quickly captured a significant market share for cash transfers, and grew astoundingly quickly, capturing 6.5 million subscribers by May 2009 with 2 million daily transactions in Kenya
alone.As of November 2011 M-Pesa has over 14million subscriber and well over 28000 agents across the country. http://www.nation.co.ke/business/news/-/1006/1258864/-/4hyt6qz/-/index.html
The growth of the service forced formal banking institutions to take note of the new venture. In December 2008, a group of banks reportedly lobbied the Kenyan finance minister to audit M-PESA, in an effort to at least slow the growth of the service. This ploy failed, as the audit found that the service was robust.
Txteagle - an "artificial artificial intelligence" system enabling the 3 billion mobile phone subscribers living in the developing world to earn small amounts of money by completing simple tasks for companies who pay them in airtime or mPesa (mobile money in Kenya).
by Vodacom
, a subsidiary of Vodafone
in mid 2011
where it is estimated that there are more than 13 million "economically active" people without a bank account.
and Egypt
as well as the launch of an international money transfer service for M-PESA in Kenya are the next steps ahead for M-PESA as of early 2009.
Know Your Customer (KYC) requirements impose obligations on prospective clients and on banks to collect identification documents of clients and then to have those documents verified by banks. The Kenyan government issues national identity cards that M-PESA leveraged in their business processes to satisfy their KYC requirements.
M-PESA obtained a “special” license from regulators, despite concerns by regulators about non-branch banking adding to the current state of financial instability. The Kenyan government issues national identity cards that M-PESA leveraged in their business processes to satisfy their Know Your Customer requirements.
Safaricom
Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc of the United Kingdom, the world's largest telecommunication company, acquired a 40% stake and management responsibility for the...
, which is a Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
affiliate. It was initially developed by Sagentia
Sagentia
- Profile :Sagentia, formed as Scientific Generics in 1986, is an international product development and technology consulting organisation. In 2006, the company changed its name to Sagentia to coincide with the company’s 20th anniversary.- History :...
before transitioning to IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
. The project was initially sponsored by the UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
government
Government of the United Kingdom
Her Majesty's Government is the central government of the United Kingdom of Great Britain and Northern Ireland. The Government is led by the Prime Minister, who selects all the remaining Ministers...
Department for International Development (DFID)
Department for International Development
The Department For International Development is a United Kingdom government department with a Cabinet Minister in charge. It was separated from the Foreign and Commonwealth Office in 1997. The goal of the department is "to promote sustainable development and eliminate world poverty". The current...
in 2003–2007.
The initial concept of M-PESA was to create a service which allowed microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
borrowers to conveniently receive and repay loans using the network of Safaricom
Safaricom
Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc of the United Kingdom, the world's largest telecommunication company, acquired a 40% stake and management responsibility for the...
airtime resellers. This would enable microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
institutions (MFIs) to offer more competitive loan rates to their users, as there is a reduced cost of dealing in cash. The users of the service would gain through being able to track their finances more easily. But when the service was trialled, customers adopted the service for a variety of alternative uses; complications arose with Faulu, the partnering microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
institution (MFI). M-PESA was re-focused and launched with a different value proposition: sending remittances home across the country and making payments.
M-PESA is a branchless banking
Branchless banking
Branchless banking is a distribution channel strategy used for delivering financial services without relying on bank branches. While the strategy may complement an existing bank branch network for giving customers a broader range of channels through which they can access financial services,...
service, meaning that it is designed to enable users to complete basic banking transactions without the need to visit a bank branch
Branch (banking)
A branch, banking center or financial center is a retail location where a bank, credit union, or other financial institution offers a wide array of face-to-face and automated services to its customers....
. The continuing success of M-PESA, in Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
, has been due to the creation of a highly popular, affordable payment service with only limited involvement of a bank. The system was developed and ran by Sagentia
Sagentia
- Profile :Sagentia, formed as Scientific Generics in 1986, is an international product development and technology consulting organisation. In 2006, the company changed its name to Sagentia to coincide with the company’s 20th anniversary.- History :...
from initial development to the 6 million customer mark. The service has now been transitioned to be operationally run by IBM Global Services
IBM Global Services
IBM Global Services is the world's largest business and technology services provider. It has over 190,000 workers across more than 160 countries...
on behalf of Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
, the initial 3 markets (Kenya, Tanzania & Afghanistan) are hosted between Rackspace
Rackspace
Rackspace US, Inc. is an IT hosting company based in San Antonio, Texas. The company also has offices in Australia, the United Kingdom, The Netherlands and Hong Kong, and data centers operating in Texas, Illinois, Virginia, the United Kingdom, and Hong Kong in late 2008...
and Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
.
Functionality
M-PESA Customers can deposit and withdraw money from a network of agents that includes airtime resellers and retail outlets acting as banking agentBanking agent
A banking agent is a retail or postal outlet contracted by a financial institution or a mobile network operator to process clients’ transactions...
s. M-PESA is operated by Safaricom
Safaricom
Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc of the United Kingdom, the world's largest telecommunication company, acquired a 40% stake and management responsibility for the...
, a Mobile network operator
Mobile network operator
A mobile network operator , also known as mobile phone operator , carrier service provider , wireless service provider, wireless carrier, or cellular company, or mobile network carrier is a telephone company that provides services for mobile phone subscribers.One essential...
(MNO), which is not classed as a deposit-taking institution (such as a bank). Therefore, M-PESA may not be advertised as a banking service.
The service enables its users to:
- Deposit and withdraw money,
- Transfer money to other users and non-users,
- Pay bills,
- Purchase airtime.
The user interface
User interface
The user interface, in the industrial design field of human–machine interaction, is the space where interaction between humans and machines occurs. The goal of interaction between a human and a machine at the user interface is effective operation and control of the machine, and feedback from the...
technology of M-PESA differs between Safaricom of Kenya and Vodacom of Tanzania, although the underlying platform is the same. While Safaricom uses SIM toolkit
SIM Application Toolkit
SIM Application Toolkit is a standard of the GSM system which enables the Subscriber Identity Module to initiate actions which can be used for various value-added services....
to provide handset menus for accessing the service, Vodacom relies on USSD
Unstructured Supplementary Service Data
Unstructured Supplementary Service Data is a protocol used by GSM cellular telephones to communicate with the service provider's computers...
to provide users with menus.
Kenya
M-PESA was first launched by the KenyaKenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
n MNO Safaricom
Safaricom
Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc of the United Kingdom, the world's largest telecommunication company, acquired a 40% stake and management responsibility for the...
, an affiliate of Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
, in March 2003. M-PESA quickly captured a significant market share for cash transfers, and grew astoundingly quickly, capturing 6.5 million subscribers by May 2009 with 2 million daily transactions in Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
alone.As of November 2011 M-Pesa has over 14million subscriber and well over 28000 agents across the country. http://www.nation.co.ke/business/news/-/1006/1258864/-/4hyt6qz/-/index.html
The growth of the service forced formal banking institutions to take note of the new venture. In December 2008, a group of banks reportedly lobbied the Kenyan finance minister to audit M-PESA, in an effort to at least slow the growth of the service. This ploy failed, as the audit found that the service was robust.
Txteagle - an "artificial artificial intelligence" system enabling the 3 billion mobile phone subscribers living in the developing world to earn small amounts of money by completing simple tasks for companies who pay them in airtime or mPesa (mobile money in Kenya).
Tanzania
M-Pesa has also been launched in TanzaniaTanzania
The United Republic of Tanzania is a country in East Africa bordered by Kenya and Uganda to the north, Rwanda, Burundi, and the Democratic Republic of the Congo to the west, and Zambia, Malawi, and Mozambique to the south. The country's eastern borders lie on the Indian Ocean.Tanzania is a state...
by Vodacom
Vodacom
Vodacom is a pan-African mobile telecommunications company, and was the 1st cellular network in South Africa. It provides GSM service to more than 35 million customers in South Africa, Tanzania, Lesotho, Mozambique and the Democratic Republic of the Congo. Revenue for the year ended 31 March 2008...
, a subsidiary of Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
in mid 2011
Afghanistan
In 2008 Vodafone partnered with Roshan, Afghanistan's primary mobile operator, to provide M-Paisa, the local brand of the service. When the service was launched in Afghanistan, it was initially used to pay policemen's salary, which was set to be competitive with what the Taliban were earning. Soon after the product was launched, the Afghan National Police found that under the previous cash model, 10% of their workforce were ghost police officers who did not exist; their salaries had been pocketed by others. When corrected in the new system, many police officers believed that they had received a raise or that there had been a mistake, as their salaries rose significantly. The National Police discovered that there was so much corruption when payments had been made using the previous model that the policemen didn't know their true salary. The service has been so successful that it has been expanded to include limited merchant payments, peer-to-peer transfers, loan disbursements and payments.South Africa
In September 2010, Vodacom and Nedbank announced the launch of the service in South AfricaSouth Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
where it is estimated that there are more than 13 million "economically active" people without a bank account.
Other Markets
Plans to expand the M-PESA product to IndiaIndia
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
and Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
as well as the launch of an international money transfer service for M-PESA in Kenya are the next steps ahead for M-PESA as of early 2009.
Regulation and KYC Rules
M-PESA sought to engage Kenyan regulators and keep them updated on the development process. M-PESA also reached out to international regulators, such as the UK’s Financial Services Authority (FSA) and the Payment Card Industry (PCI) to receive input on how best to protect client information and adhere to internationally recognized best practices.Know Your Customer (KYC) requirements impose obligations on prospective clients and on banks to collect identification documents of clients and then to have those documents verified by banks. The Kenyan government issues national identity cards that M-PESA leveraged in their business processes to satisfy their KYC requirements.
M-PESA obtained a “special” license from regulators, despite concerns by regulators about non-branch banking adding to the current state of financial instability. The Kenyan government issues national identity cards that M-PESA leveraged in their business processes to satisfy their Know Your Customer requirements.
External links
- Financial transactions & Mobile Technology in Emerging Economies (YouTube video)
- Mobile phone banking in Africa (YouTube Video)
- Mpesa Send Money Home TV Commercial (YouTube Video)
- M-PESA documentary (YouTube video)
- Banking Through Mobile Phones with M-Pesa (YouTube Video)
- M-Pesa progress and prospects or http://www.gsmworld.com/documents/INNOVATIONS-GSMA_FINAL-01-22-09.pdf
- CGAP Article - What you don't know about M-PESA (Blog)
- CGAP Brief- Observation of Customer Usage and Impact from M-PESA (CGAP brief)