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M-Pesa (M for mobile, pesa is Swahili for money) is a mobile-phone based money transfer and microfinancing service for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania.[1] Currently the most developed mobile payment system in the world, M-Pesa allows users with a national ID card or passport to deposit, withdraw, and transfer money easily with a mobile device.[2]


In 2002, Researchers at Gamos and the Commonwealth Telecommunications Organisation, funded by Department for International Development UK, documented that in Uganda, Botswana and Ghana, people were spontaneously using airtime as a proxy for money transfer.[3] Africans were transferring airtime to their relatives or friends who were then using it or reselling it. Gamos researchers approached MCel in Mozambique, and in 2004 MCel introduced the first authorised airtime credit swapping – a precursor step towards M-Pesa.[4] The idea was discussed by the Commission for Africa[5] and DFID introduced the researchers to Vodafone who had been discussing supporting microfinance and back office banking with Mobile phones. S Batchelor (Gamos) and N Hughes (Vodafone CSR) discussed how a system of money transfer could be created in Kenya. DFID amended the terms of reference for its grant to Vodafone, and piloting began in 2005. In April 2007, following a student software development project from Kenya,[6] Safaricom launched a new mobile phone based payment and money transfer service, known as M-Pesa.[7] The service allows users to deposit money into an account stored on their cell phones, to send balances using SMS technology to other users (including sellers of goods and services), and to redeem deposits for regular money. Users are charged a small fee for sending and withdrawing money using the service.[8] M-Pesa has spread quickly, and has become the most successful mobile phone based financial service in the developing world.[7] By 2012, a stock of about 17 million M-Pesa accounts had been registered in Kenya.[1]

The initial work of developing the product was given to a product and technology development company[9] known as Sagentia. Development and second line support responsibilities were transferred to IBM in September 2009, to where most of the original Sagentia team transferred.


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.[10] This would enable microfinance institutions (MFIs) to offer more competitive loan rates to their users, as costs are lower than when dealing in cash. The users of the service would gain through being able to track their finances more easily. When the service was piloted, customers adopted the service for a variety of alternative uses and complications arose with Faulu, the partnering MFI. In discussion with other parties, M-Pesa was re-focused and launched with a different value proposition: sending remittances home across the country and making payments.[10]

M-Pesa is a branchless banking service, meaning that it is designed to enable users to complete basic banking transactions without visiting 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.[11][12]

M-Pesa is also criticized for stopping the government from getting seigniorage revenues.[13]


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).

The service enables its users to:

  • Deposit and withdraw money
  • Transfer money to other users and non-users
  • Pay bills
  • Purchase airtime[14][15]
  • Transfer money between the service and a bank account (in some markets) [16]

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 (STK) to provide handset menus for accessing the service, Vodacom relies mostly on USSD to provide users with menus, but also supports STK.[17]

Cost, Transaction Charges, Statistics[edit]

The transaction charges range is from 66% down to 0.16% depending who is involved and the amount of money[18][19]:

  • up to 66% for a transfer to an unregistered user
  • up to 30% for a transfer to a registered user
  • the lowest transfer rate is 0.16% to a registered user for KSH 70'000 (800 USD, 580 EUR)
  • the cost for withdrawing money from an m-pesa agent reach from 20% max to min 0.47%



An M-Pesa payment till at a Kenyan coffee shop

M-Pesa was first launched by the Kenyan mobile network operator Safaricom, where Vodafone is technically a minority shareholder (40%),[20] in March 2007.[10] M-Pesa quickly captured a significant market share for cash transfers, and grew astoundingly quickly, capturing 17 million subscribers by December 2011 in Kenya alone.[1]

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.[21]


M-Pesa was launched in Tanzania by Vodacom in 2008 but its initial ability to attract customers fell short of expectations. 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.[22] As of May 2013, M-Pesa in Tanzania has five million subscribers.[23]


In 2008 Vodafone partnered with Roshan, Afghanistan's primary mobile operator, to provide M-Pesa, the local brand of the service.[24][25] 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.[26]

South Africa[edit]

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.[27] 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.[28] 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.[29] According to MoneyWeb,[30] 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)[31] than were first targeted.[32]


M-Pesa, branded as M-Paisa (the paisa being the largely unused subunit of the Indian rupee), was launched in India[33][34] as a close partnership with HDFC bank in November 2011.[35] Development for the bank began as early as 2008. The service continues to operate in a limited geographical area in India. Vodafone India had partnered with both HDFC and ICICI,[36] ICICI launched M-Pesa on April 18, 2013.[37] Vodafone plans to rollout this service throughout India.[38] The user needs to register for this service by paying 200 Rupees and there are charges levied per M-Pesa transaction.[39][40]

Other markets[edit]

As of early 2008, plans exist to expand the M-Pesa product to Egypt.[41] Plans also exist expand to other markets as well as the launch of an international money transfer service further to Western Union for M-Pesa in Kenya.[42]

Regulation and KYC rules[edit]

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 understand how best to protect client information and adhere to internationally recognized best practices.[43]

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.[44] The Kenyan government issues national identity cards that M-Pesa leveraged in their business processes to satisfy their KYC requirements.[45]

M-Pesa obtained a "special" license from regulators, despite concerns by regulators about non-branch banking adding to the current state of financial instability.

See also[edit]


  1. ^ a b c "CCK releases 2nd quarter ICT sector statistics for 2011/2012". Communications Commission of Kenya. 17 Apr 2012. 
  2. ^ Saylor, Michael (2012). The Mobile Wave: How Mobile Intelligence Will Change Everything. Perseus Books/Vanguard Press. p. 304. ISBN 978-1593157203. 
  3. ^ Innovative Demand Models for Telecommunications Services FINAL TECHNICAL REPORT Contract Number R8069 Dr. Kevin McKemey (Gamos) Dr. Nigel Scott (Gamos) Professor David Souter (University of Strathclyde, former CEO of CTO) Dr. Thomas Afullo (ex University of Botswana) Mr. Richard Kibombo (Makerere Institute of Social Research) Dr. O. Sakyi-Dawson (University of Ghana) Funded by: Department for International Development (DFID)
  4. ^ Batchelor, S. (2012), Changing the Financial Landscape of Africa: An Unusual Story of Evidence-informed Innovation, Intentional Policy Influence and Private Sector Engagement. IDS Bulletin, 43: 84–90. doi: 10.1111/j.1759-5436.2012.00367.x http://onlinelibrary.wiley.com/doi/10.1111/j.1759-5436.2012.00367.x/abstract
  5. ^ Scott N, Batchelor S, Ridley J and Jorgensen B 2004 The impact of mobile phones in. Africa, background paper prepared for the Commission for Africa, London.
  6. ^ "FDCF funded M-PESA scheme launched in Kenya as Vodafone/Citibank plan global M-PESA venture". 
  7. ^ a b Jack, William; Suri, Tavneet (August 2010). The Economics of M-PESA. 
  8. ^ "M-PESA Tariff". 
  9. ^ "Sagentia". 
  10. ^ 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.
  11. ^ Dial M for money. (2007, 28 June). The Economist. Retrieved 6 December 2007
  12. ^ "News and events". Sagentia. Retrieved 16 October 2012. 
  13. ^ Why central banks should take charge of their digital currencies - FT Alphaville
  14. ^ Vodacom. Send money by phone with Vodafone M-PESA. Retrieved 19 February 2009
  15. ^ Roshan. M-Paisa—The Hawala On Your Mobile! Retrieved 19 February 2009
  16. ^ "M-KESHO"
  17. ^ Vaughan, P. (2008, 15 July). 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.
  18. ^ New MPESA tariffs released, 2013-02.
  19. ^ M-PESA statistics, 2013-11.
  20. ^ Česky. "Vodafone - Wikipedia, the free encyclopedia". En.wikipedia.org. Retrieved 16 October 2012. 
  21. ^ Cash Transfers Pose Threat to Banks. Philanthropy Action, 26 February 2009
  22. ^ M-Money Channel Distribution Case – Tanzania (2010)
  23. ^ "Vodacom Tanzania reports five million M-PESA subs; transactions top USD823m". telegeography. 
  24. ^ Vodafone. (2008, 10 February). Vodafone and Roshan Launch First Mobile Money Transfer Service in Afghanistan. Retrieved 29 January 2009
  25. ^ Vodafone. (2008, 8 April). Vodacom Announces Intention to Launch Vodafone M-PESA Mobile Money Transfer Service in Tanzania. Retrieved 29 January 2009
  26. ^ Rice, Dan. "One Cell Phone at a Time: Countering Corruption in Afghanistan". Guy Filippelli. Small Wars Journal. Retrieved 21 September 2010. 
  27. ^ Staff Writer. "M-PESA launched in South Africa". How We Made It in Africa. Retrieved 16 October 2010. 
  28. ^ "M-Pesa disappoints for Vodacom SA". TechCentral. 
  29. ^ GITHAHU, MWANGI. "Kenya: Could Someone Please Start M-Pesa in South Africa". AllAfrica. 
  30. ^ "About MoneyWeb". MoneyWeb. 
  31. ^ "Living Standards Measure". South African Advertising Research Foundation. 
  32. ^ "Vodacom, Nedbank present a new game plan on M-pesa". MoneyWeb. 
  33. ^ "India Launch Desire". Retrieved 28 June 2012
  34. ^ Department for International Development [DFID]. (2008, 9 May). Mobile phone banking in Africa [Video]. Retrieved 19 February 2009
  35. ^ HDFC Launch. "HDFC Launch". Retrieved 28 June 2012
  36. ^ ICICI Bank. "ICICI Bank". Retrieved 28 June 2012
  37. ^ Russell, Jon (17 April 2013). "Vodafone launches M-Pesa mobile banking service in India, targeting 700m ‘unbanked’ people". The Next Web. Retrieved 20 April 2013. 
  38. ^ http://www.thehindubusinessline.com/features/smartbuy/vodafone-to-roll-out-mpesa-services-in-ap-kerala/article5851565.ece
  39. ^ http://www.thehindubusinessline.com/industry-and-economy/info-tech/vodafone-launches-money-transfer-service-mpesa-in-delhi/article5044945.ece?ref=relatedNews
  40. ^ http://moneysaverindia.com/finance/ignore-both-airtel-money-and-m-pesa/
  41. ^ "Egypt Launch Desire". Retrieved 28 June 2012
  42. ^ Safaricom trials global M-Pesa money transfer service. (2008, 5 December). The Paypers. Retrieved 16 December 2008
  43. ^ Makin. "Regulatory Issues Around Mobile Banking". OECD. Retrieved 15 November 2011. 
  44. ^ Mas, I. (2011). Why Are Banks So Scarce In Developing Countries? Critical Review: A Journal of Politics and Society, 23(1–2), 135-145.
  45. ^ Makin. "Regulatory Issues Around Mobile Banking". OECD, Consult Hyperion. Retrieved 15 November 2011. 
  • Mas, I., and Morawczynski, O. (2009). "Designing Mobile Money Services Lessons from M-PESA". Innovations. 4 (2).
  • Morawczynski, O., and Miscione, G. (2008). "Examining Trust in Mobile Banking Transactions in Kenya: The Case of M-PESA" IFIP WG 9.4-University of Pretoria Joint Workshop, Pretoria, South Africa.
  • Morawczynski, O. (2008). "Surviving in the 'Dual System': How M-PESA is Fostering Urban-to-Rural Remittances in a Kenyan Slum" HCC8 Conference. Pretoria, South Africa.
  • Omwansa, T. (2009). "M-Pesa: Progress and Prospects" innovations / Mobile World Congress 2009. Pg 107-123. http://www.strathmore.edu/pdf/innov-gsma-omwansa.pdf or http://www.gsmworld.com/documents/INNOVATIONS-GSMA_FINAL-01-22-09.pdf

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