M-Pesa

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M-Pesa (M for mobile, pesa is Swahili for money) is the product name of a mobile-phone based money transfer service for Safaricom, which is a Telkom Kenya and Vodafone affiliate. M-Pesa was initially developed by Sagentia before transitioning to IBM.

Contents

[edit] History

The system was developed and ran by Sagentia from initial development to the 6 million customer mark. The pilot project was initially sponsored by the UK government Department for International Development (DFID) in 2003–2006 and launched in 2007.[1][2]

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.[citation needed]

[edit] Concept

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.[3] 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 and complications arose with Faulu, the partnering MFI. M-Pesa was re-focused and launched with a different value proposition: sending remittances home across the country and making payments.[3]

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.[4] 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.[5][6]

[edit] Services

M-Pesa Customers can deposit and withdraw money from a network of agents that includes airtime resellers and retail outlets acting as banking agents. 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.[citation needed]

The service enables its users to:

  • Deposit and withdraw money
  • Transfer money to other users and non-users
  • Pay bills
  • Purchase airtime[7][8]

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.[9]

[edit] Markets

[edit] Kenya

M-Pesa was first launched by the Kenyan MNO Safaricom, an affiliate of Vodafone, in March 2007.[3] 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 14 million subscribers and well over 28,000 agents across the country.[10]

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.[11]

Txteagle, an "artificial artificial intelligence" system, enables 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 M-Pesa.[12]

[edit] Tanzania

M-Pesa was launched in Tanzania by Vodacom in 2008 but its initial ability to attract customers fell short of expectations. Consultative Group to Assist the Poor (CGAP) analyzed the differences between the Kenyan and Tanzanian markets that contributed to slower-than-expected adoption of the service. Issues included population density, dominance (or lack thereof) of the mobile service providers, agent networks,[13] marketing strategy, and pricing schemes.[14] In 2010, the International Finance Corporation released a report which explored many of these issues in greater depth and analyzed the strategic changes that Vodacom has implemented to improve their market position.[15] As of 2012, M-Pesa in Tanzania has nine million subscribers and recently undertook a major upgrade of its system.[16]

[edit] Afghanistan

In 2008 Vodafone partnered with Roshan, Afghanistan's primary mobile operator, to provide M-Paisa, the local brand of the service.[17][18] 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.[19]

[edit] South Africa

In September 2010 Vodacom and Nedbank announced the launch of the service in South Africa, where it is estimated that there are more than 13 million "economically active" people without a bank account.[20] Since 2010, M-Pesa has been slow to gain a toehold in the South African market. When M-Pesa first launched, Vodacom projected that it would sign up 10 million users in the following three years. By May 2011, it had registered approximately 100,000 customers.[21] The gap between expectations for M-Pesa's performance and its actual performance can be partly attributed to significant differences between the Kenyan and South African markets, including the banking regulations at the time of M-Pesa's launch in each country.[22] According to MoneyWeb[23] , a South African investment website, "A tough regulatory environment with regards to customer registration and the acquisition of outlets also compounded the company's troubles, as the local regulations are more stringent in comparison to our African counterparts. Lack of education and product understanding also hindered efforts in the initial roll out of the product." In June 2011, Vodacom and Nedbank launched a campaign to re-position M-Pesa, targeting the product to potential customers who have a higher Living Standard Measures (LSM)[24] than were first targeted.[25]

[edit] Other markets

As of early 2009, plans to expand the M-Pesa product to India[26] and Egypt as well as the launch of an international money transfer service for M-Pesa in Kenya.[27]

[edit] 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.[28]

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.[29] The Kenyan government issues national identity cards that M-Pesa leveraged in their business processes to satisfy their KYC requirements.[30]

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.[31]

[edit] See also

[edit] Notes

  1. ^ Financial Deepening Challenge Fund (FDCF). Vodafone UK/Global—M-Pesa (Mobile Money). Retrieved February 20, 2009
  2. ^ Vodafone. (2007, February 13). Safaricom and Vodafone launch M-PESA, a new mobile payment service. Retrieved January 29, 2009
  3. ^ a b c Hughes, N., & Lonie, S. (2007). M-PESA: Mobile Money for the "Unbanked": Turning Cellphones into 24-Hour Tellers in Kenya. Innovations: Technology, Governance, Globalization, 2(1–2), 63–81.
  4. ^ Ivatury, G., & Mas, I. (2008, April). The Early Experience with Branchless Banking (Focus Note No. 46). Washington, D.C.: Consultative Group to Assist the Poor. Retrieved July 11, 2008
  5. ^ Dial M for money. (2007, June 28). The Economist. Retrieved December 6, 2007
  6. ^ http://www.sagentia.com/News.aspx?Path=/Press_release_and_News_archive/2007/MPesa_update
  7. ^ Vodacom. Send money by phone with Vodafone M-PESA. Retrieved February 19, 2009
  8. ^ Roshan. M-Paisa—The Hawala On Your Mobile! Retrieved February 19, 2009
  9. ^ Vaughan, P. (2008, July 15). Providing the Unbanked with Access to Financial Services: The Case of M-PESA in Kenya. Presentation given during the Mobile Banking & Financial Services Africa conference in Johannesburg, South Africa.
  10. ^ http://www.nation.co.ke/business/news/-/1006/1258864/-/4hyt6qz/-/index.html
  11. ^ Cash Transfers Pose Threat to Banks. Philanthropy Action, 26 February 2009
  12. ^ txteagle pays in M-PESA
  13. ^ http://www.cgap.org/p/site/c/template.rc/1.11.1029/
  14. ^ "Mobile Banking in Tanzania: Can Kenya's success be replicated next door?". CGAP. http://www.cgap.org/p/site/c/template.rc/1.26.10908/. 
  15. ^ M-Money Channel Distribution Case – Tanzania
  16. ^ "Tanzania: Vodacom Upgrades M-Pesa System". AllAfrica. http://allafrica.com/stories/201201170470.html. 
  17. ^ Vodafone. (2008, February 10). Vodafone and Roshan Launch First Mobile Money Transfer Service in Afghanistan. Retrieved January 29, 2009
  18. ^ Vodafone. (2008, April 8). Vodacom Announces Intention to Launch Vodafone M-PESA Mobile Money Transfer Service in Tanzania. Retrieved January 29, 2009
  19. ^ Rice, Dan. "One Cell Phone at a Time: Countering Corruption in Afghanistan". Small Wars Journal. http://smallwarsjournal.com/blog/2010/09/one-cell-phone-at-a-time-count/. Retrieved September 21, 2010. 
  20. ^ Staff Writer. "M-PESA launched in South Africa". How We Made It in Africa. http://www.howwemadeitinafrica.com/m-pesa-launched-in-south-africa/3611/. Retrieved October 16, 2010. 
  21. ^ "M-Pesa disappoints for Vodacom SA". TechCentral. http://www.techcentral.co.za/m-pesa-disappoints-for-vodacom-sa/23167/. 
  22. ^ GITHAHU, MWANGI. "Kenya: Could Someone Please Start M-Pesa in South Africa". AllAfrica. http://allafrica.com/stories/201109260410.html. 
  23. ^ "About MoneyWeb". MoneyWeb. http://www.moneyweb.co.za/mw/view/mw/en/page293723. 
  24. ^ "Living Standards Measure". South African Advertising Research Foundation. http://www.saarf.co.za/LSM/lsms.htm. 
  25. ^ "Vodacom, Nedbank present a new game plan on M-pesa". MoneyWeb. http://www.moneyweb.co.za/mw/view/mw/en/page292516?oid=545137&sn=2009%20Detail. 
  26. ^ Department for International Development [DFID. (2008, May 9). Mobile phone banking in Africa [Video]. Retrieved February 19, 2009]
  27. ^ Safaricom trials global M-Pesa money transfer service. (2008, December 5). The Paypers. Retrieved December 16, 2008
  28. ^ Makin. [www.oecd.org/dataoecd/40/24/43631885.pdfSimilar "Regulatory Issues Around Mobile Banking"]. OECD, Consult Hyperion. www.oecd.org/dataoecd/40/24/43631885.pdfSimilar. Retrieved November 15, 2011. 
  29. ^ Mas, I. (2011). Why Are Banks So Scarce InDeveloping Countries?. Critical Review: A Journal of Politics and Society, 23(1–2), 135-145.
  30. ^ Makin. [www.oecd.org/dataoecd/40/24/43631885.pdfSimilar "Regulatory Issues Around Mobile Banking"]. OECD, Consult Hyperion. www.oecd.org/dataoecd/40/24/43631885.pdfSimilar. Retrieved November 15, 2011. 
  31. ^ Makin. [www.oecd.org/dataoecd/40/24/43631885.pdfSimilar "Regulatory Issues Around Mobile Banking"]. OECD, Consult Hyperion. www.oecd.org/dataoecd/40/24/43631885.pdfSimilar. Retrieved November 15, 2011. 

[edit] References

[edit] External links

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