History
An M-PESA-enabled mobile phone can also function as an electronic wallet and can hold up to KSh.500,000/= (approx. US$3500). Safaricom has announced that it intends to roll out M-PESA to other countries.
M-PESA (M for mobile, pesa is Swahili for money) is a mobile phone-based money transfer, financing and micro financing service, launched in 2007 by Vodafone for Safaricom and Vodacom. M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash. After the pilot testing it was broadened to become a general money-transfer scheme. Since then safaricom M-PESA brand has reached 12 countries in Africa and three countries outside the continent.
How it works
Once a user registers for M-PESA, they pay money into the system by handing cash at an M-Pesa agent, who then credits the money to the user's M-Pesa account. The user then gets an SMS notifying them of the transaction.
A user withdraws money by visiting an agent, who checks that the user has sufficient funds before debiting the user's account and handing over the cash. An M-Pesa user can also transfer money to others using a menu on their phone. Cash can thus be sent one place to another instantly, safely and easily. This is in contrast to the preferred system before where money was sent by a porter, usually a friend, relative or bus crew, to the intended recipient.
M-PESA was first launched by the Kenyan mobile network operator Safaricom, where Vodafone was technically a minority shareholder (40%), in March 2007. M-PESA quickly captured a significant market share for cash transfers and grew to 17 million subscribers by December 2011 in Kenya alone.
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. At this time, The Banking Act did not provide the basis to regulate products offered by non-banks, of which M-PESA was one such very successful product. As at November 2014, M-PESA transactions for the 11 months of 2014 were valued at KSh.2.1 trillion/=, a 28% increase from 2013, and almost half the value of the country's GDP.
On November 19, 2014, Safaricom launched a companion android app Safaricom M-Ledger for its M-PESA users. The application, currently available only on Android, gives M-PESA users a historical view of all their transactions.
M-Pesa's usage and success in Kenya
M-Pesa has been particularly successful in Kenya, compared to mobile money platforms in other countries. Contributing factors here include the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom; the regulator's initial decision to allow the scheme to proceed on an experimental basis, without formal approval; a clear and effective marketing campaign (“Send money home”); an efficient system to move cash around behind the scenes; and, the post-election violence in the country in early 2008.
During the post-election violence, M-Pesa was used to transfer money to people trapped in Nairobi's slums at the time. Some Kenyans regarded M-Pesa as a safer place to store their money than the banks, which were entangled in ethnic disputes. Having established a base of initial users, M-Pesa then benefited from network effects: the more people who used it, the more it made sense for others to sign up for it.
M-Pesa has since been extended to offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money as compared to doing so from banks.
M-Pesa has a wide range of financial services including Person to Person, ATM withdrawal, Payments, Bulk Payments and Bank to M-Pesa.
As of January 2016, M-Pesa is used by 21.8 million Kenyans, with over 1.5 million of M-Pesa users using the bill payment feature. At the time M-Pesa had a network of over 90,000 agent outlets.
Average value of monthly person to person transfers on M-Pesa was KSh.106 billion/= while Person to Business transfers were at KSh.23.5 billion/= and Business to Person at KSh 27.8 billion/= per month.
M-Pesa is in partnership with a number of banks. M-Shwari and KCB M-Pesa are two such services, which provide access to savings and loans to users. M-Shwari was launched in November 2012 in partnership with Commercial Bank Of Africa.
Safaricom and VISA in June 2022 launched an M-PESA Visa virtual card[31] that allows Kenyan users to shop for products and pay for services worldwide, facilitating safe cashless payments at merchant locations in over 200 countries via Visa's global network.
South Africa
In September 2010 Vodacom and Ned bank announced the launch of the service in South Africa, where there were estimated to be more than 13 million "economically active" people without a bank account. M-Pesa has been slow to gain a toehold in the South African market compared to Vodacom's projections that it would sign up 10 million users in the following three years. By May 2011, it had registered approximately 100,000 customers. The gap between expectations for M-Pesa's performance and its actual performance can be partly attributed to differences between the Kenyan and South African markets, including the banking regulations at the time of M-Pesa's launch in each country. According to Money Web, 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) index than were first targeted.
Despite efforts, as at March 2015, M-Pesa still struggled to grow its customer base. This comes as no surprise as South Africa is well known for being ahead of financial institutions globally in terms of maturity and technological innovation.
South Africa
In September 2010 Vodacom and Ned bank announced the launch of the service in South Africa, where there were estimated to be more than 13 million "economically active" people without a bank account. M-Pesa has been slow to gain a toehold in the South African market compared to Vodacom's projections that it would sign up 10 million users in the following three years. By May 2011, it had registered approximately 100,000 customers. The gap between expectations for M-Pesa's performance and its actual performance can be partly attributed to differences between the Kenyan and South African markets, including the banking regulations at the time of M-Pesa's launch in each country. According to Money Web, 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) index than were first targeted.
Despite efforts, as at March 2015, M-Pesa still struggled to grow its customer base. This comes as no surprise as South Africa is well known for being ahead of financial institutions globally in terms of maturity and technological innovation. According to Genesis Analytics, 70% of South Africans are "banked", meaning that they have at least one bank account with an established financial institution which have their own banking products which directly compete with the M-Pesa[35] offering.
Tanzania
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.[23] As of September 2021, M-Pesa in Tanzania has 12.66 million subscribers
India
M-Pesa was launched in India as a close partnership between Vodafone India and ICICI bank in November 2011 under the leadership of Mr Suresh Sethi. The service today operates in all telecom circles where Vodafone India is present. Users (of any telecom operator) can activate the M-Pesa service by downloading the Vodafone M-Pesa app (available on all app stores) on to their phones and registering themselves or by visiting any Vodafone store, Vodafone mini-store or M-Pesa agent point across the country. Customers of Vodafone can also activate the M-Pesa service by dialing *400# from their mobiles and completing the registration process. Using the *400# (USSD) facility allows Vodafone customers to avail of the benefits of M-Pesa without having a smartphone or a data connection. Registration is entirely free of charge.
A customer who activates his M-pesa wallet by only providing his basic demographic details and not sharing any proof of identity is enabled as a minimum KYC customer on M-Pesa. A minimum KYC customer of M-Pesa can not do money transfer (P2B, P2P) from his wallet account but can avail services like recharges (Prepaid mobile/DTH), bill payments, merchant payments, EMI payments, utility payments, insurance payments etc. They also have a monthly /daily/per transaction limit of ₨.10,000/-. If a minimum KYC M-Pesa customer wants to avail of bank transfer facility/increase his or her monthly transaction limit, then he or she can do so by doing their KYC using their Aadhar at any Vodafone store or M-Pesa agent point.
M-Pesa in India operates under two licenses, the PPI (Prepaid Payment Instruments) license issued by the Reserve Bank of India
