M-Pesa

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 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.[1][2]

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; 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.[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] 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.

Contents

Functionality

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.

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.[9]

Markets

Kenya

M-PESA was first launched by the Kenyan MNO Safaricom, an affiliate of Vodafone, in March 2003.[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 14million subscriber and well over 28000 agents across the country. [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.[10]

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).[11]

Tanzania

M-Pesa has also been launched in Tanzania by Vodacom, a subsidiary of Vodafone 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.[12][13] 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.[14]

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.[15]

Other Markets

Plans to expand the M-PESA product to India[16] and Egypt as well as the launch of an international money transfer service for M-PESA in Kenya[17] 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.[18]

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.[19] The Kenyan government issues national identity cards that M-PESA leveraged in their business processes to satisfy their KYC requirements.[20]

M-PESA obtained a “special” license from regulators, despite concerns by regulators about non-branch banking adding to the current state of financial instability.</ref> The Kenyan government issues national identity cards that M-PESA leveraged in their business processes to satisfy their Know Your Customer requirements.[21]

See also

References

  1. ^ Financial Deepening Challenge Fund (FDCF). (No date). Vodafone UK/Global—M-Pesa (Mobile Money). Retrieved February 20, 2009, from http://www.financialdeepening.org/default.asp?id=694&ver=1.
  2. ^ Vodafone. (2007, February 13). Safaricom and Vodafone launch M-PESA, a new mobile payment service. Retrieved January 29, 2009, from http://www.vodafone.com/start/media_relations/news/group_press_releases/2007/safaricom_and_vodafone.html.
  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, from http://www.cgap.org/gm/document-1.9.2640/FocusNote_46.pdf
  5. ^ Dial M for money. (2007, June 28). The Economist. Retrieved December 6, 2007, from http://www.economist.com/finance/displaystory.cfm?story_id=9414419
  6. ^ from http://www.sagentia.com/News.aspx?Path=/Press_release_and_News_archive/2007/MPesa_update
  7. ^ Vodacom. (No date). Send money by phone with Vodafone M-PESA. Retrieved February 19, 2009, from http://www.vodacom.co.tz/docs/docredir.asp?docid=3492.
  8. ^ Roshan. (No date). M-Paisa—The Hawala On Your Mobile! Retrieved February 19, 2009, from http://www.roshan.af/web/?page_id=475.
  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. ^ Cash Transfers Pose Threat to Banks Philanthropy Action, 26 February 2009
  11. ^ |txteagle pays in mPesa
  12. ^ Vodafone. (2008, February 10). Vodafone and Roshan Launch First Mobile Money Transfer Service in Afghanistan. Retrieved January 29, 2009, from http://www.vodafone.com/start/media_relations/news/group_press_releases/2007/vodafone_and_roshan.html
  13. ^ Vodafone. (2008, April 8). Vodacom Announces Intention to Launch Vodafone M-PESA Mobile Money Transfer Service in Tanzania. Retrieved January 29, 2009, from http://www.vodafone.com/start/media_relations/news/group_press_releases/2007/vodacom_announces.html
  14. ^ Rice, Dan. "One Cell Phone at a Time: Countering Corruption in Afghanistan". Guy Filippelli. Small Wars Journal. http://smallwarsjournal.com/blog/2010/09/one-cell-phone-at-a-time-count/. Retrieved September 21, 2010. 
  15. ^ 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. 
  16. ^ Department for International Development [DFID]. (2008, May 9). Mobile phone banking in Africa [Video]. Retrieved February 19, 2009, from http://www.youtube.com/watch?v=TNrDv4PQdCc
  17. ^ Safaricom trials global M-Pesa money transfer service. (2008, December 5). The Paypers. Retrieved December 16, 2008, from http://www.thepaypers.com/news/printarticle.aspx?cid=736370
  18. ^ 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. 
  19. ^ Mas, I. (2011). Why Are Banks So Scarce InDeveloping Countries?. Critical Review: A Journal of Politics and Society, 23(1–2), 135-145.
  20. ^ 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. 
  21. ^ 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. 

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

"Why has M-PESA become so popular in Kenya?" CGAP Technology Blog. http://technology.cgap.org/2008/06/17/why-has-m-pesa-become-so-popular-in-kenya/

External links