A kiosk displays M-pesa advertising in Kenya in 2012. It has since expanded to Afghanistan, South Africa, India how m pesa works pdf in 2014 to Romania and in 2015 to Albania.
Users are charged a small fee for sending and withdrawing money using the service. M-Pesa has spread quickly, and by 2010 had become the most successful mobile-phone-based financial service in the developing world. By June 2016, a total of 7 million M-Pesa accounts have been opened in Tanzania by Vodacom. The service has been lauded for giving millions of people access to the formal financial system and for reducing crime in otherwise largely cash-based societies. Ghana, people were spontaneously using airtime as a proxy for money transfer. Kenyans were transferring airtime to their relatives or friends who were then using it or reselling it.
DFID introduced the researchers to Vodafone who had been discussing supporting microfinance and back office banking with Mobile phones. DFID amended the terms of reference for its grant to Vodafone, and piloting began in 2005. A student from Moi University in Kenya came up with a mobile software that could allow people to send, receive, and withdraw money from their mobile devices. Safaricom however convinced the student and bought the rights of ownership of this project hence becoming the sole owners of the patent rights.
September 2009, where most of the original Sagentia team transferred to. Following a 3-year migration project to a new technology stack, as of 26 February 2017, IBM’s responsibilities have been transferred to Huawei in all markets. The initial concept of M-Pesa was to create a service which would allow microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers. 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. A partnership with Kenya-based Equity Bank launched M-KESHO, a product using M-PESA’s platform and agent network, that offers expanded banking services like interest-bearing accounts, loans, and insurance. M-Pesa differs between Safaricom of Kenya and Vodacom of Tanzania, although the underlying platform is the same. Transaction charges depend on the amount of money being transferred and whether the payee is a registered user of the service. At the highest transfer bracket of 50,001-70,000 Kshs. The maximum amount that can be transferred to a non-registered user of the system is 35,000 Kshs, with a fee of 275 Kshs. Cash withdrawal fees are also charged.
With a charge of 10 Kshs, for a withdrawal of 50-100 Kshs, up to 330 Kshs for a withdrawal of 50,001-70,000 Kshs. However this is clearly wrong given the above quoted transaction costs which range from 0. The actual figure for M-Pesa transactions in 2016 was 15bn Ksh per day equivalent to 52 billion CHF in Kenya alone in that year, putting Safaricom’s profit ratio at around 0. 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 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 KES. 2013, and almost half the value of the country’s GDP. The application, currently available only on Android, gives M-Pesa users a historical view of all their transactions. M-Pesa was launched in Tanzania by Vodacom in 2008 but its initial ability to attract customers fell short of expectations. Vodacom has implemented to improve their market position.
As of May 2013, M-Pesa in Tanzania has five million subscribers. Afghanistan’s primary mobile operator, to provide M-Pesa, the local brand of the service. When the service was launched it was initially used to pay policemen’s salaries set to be competitive with what the Taliban were earning. 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 did not 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.
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. 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.