{"id":18331,"date":"2016-11-18T14:45:13","date_gmt":"2016-11-18T19:45:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/"},"modified":"2016-11-18T14:50:44","modified_gmt":"2016-11-18T19:50:44","slug":"m-pesa-when-mobile-money-revolutionizes-banking-in-africa","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/","title":{"rendered":"M-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa"},"content":{"rendered":"

Strong lack of financial inclusion in Africa <\/u><\/strong><\/p>\n

Less than 35% of the adult population in Sub-Saharan Africa has access to financial services[3]<\/a>. Such a lack of financial inclusion is mostly due to the fact that banks consider the financial case for inclusion to be negative. However, a majority of analysts say that \u201cover the coming years, mobile money, electronic payments and new banking technologies will continue their significant contribution to sustainable economic development\u201d<\/em>[4]<\/a> in Africa. Only a limited number of initiatives have reached a sustainable scale to date: M-Pesa in Kenya (Exhibit 1), MTN Uganda, Vodacom Tanzania or FNB in South Africa[5]<\/a>.<\/p>\n

Exhibit 1<\/p>\n

\"mp1\"<\/a><\/p>\n

M-Pesa, a \u201cbest-in-class\u201d example <\/u><\/strong><\/p>\n

<\/u>In 2007, Safaricom (Kenya\u2019s largest mobile network operator) launched \u201cM-Pesa\u201d: \u201cM\u201d is for mobile, \u201cPesa\u201d is for money (Swahili). The concept was simple: any \u201cM-PESA customer\u201d can use his or her mobile phone to \u201cmove money quickly, securely, and across great distances, directly to another mobile phone user<\/em>\u201d[6]<\/a>.<\/p>\n

How M-Pesa used digital at the beginning\u2026<\/u><\/strong><\/p>\n

Digital innovations helped the company develop an innovative and compelling value proposition. Indeed, M-Pesa was:<\/p>\n

Easy –<\/strong> The customer does not need to have any bank account, any fancy smartphone or any high-speed internet connection. He or she only needs to register for an M-Pesa account with Safaricom. It is also very easy for a customer to find an agent\/\u201dSafaricom dealer\u201d – more than 50,000 of them being spread across the country (Exhibit 2).<\/p>\n

Exhibit 2<\/p>\n

\"mp2\"<\/a>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\"mp3\"<\/a><\/p>\n

Intuitive –<\/strong> Customers transform cash into e-money at \u201cSafaricom dealers\u201d and follow simple instructions on their phones to make payments.<\/p>\n

Secure <\/strong>– The account is secure, PIN-protected and supported with a full time customer service.<\/p>\n

\u2026 and later on\u2026<\/u><\/strong><\/p>\n

However simple the concept might seem, technology was a key driver in how significantly the value proposition evolved after the initial launch.<\/p>\n

First, the intent was to create a service which \u201cwould allow microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers<\/em>\u201d[7]<\/a>. Very quickly, customers started to send remittances home and M-Pesa evolved to a \u201cgeneral money-transfer scheme<\/em>\u201d[8]<\/a>. More recently, M-Pesa was extended to offer\u00a0loans and savings products, or even to disburse salaries or pay bills.<\/p>\n

\u2026 to meet a growing and sustainable success <\/u><\/strong><\/p>\n

Within its first month of operations, Safaricom registered over 20,000 customers \u2013 way more than the targeted business plan[9]<\/a>. Today, M-Pesa is used by over 25 million active customers[10]<\/a>, after recent expansion to new countries such as Afghanistan, South Africa and Romania. For Kenya only, around 25% of the country\u2019s gross national product flows through it.<\/p>\n

The business model also seems to be sustainable for Safaricom: on the topline, users are charged a small fee for sending or withdrawing money. On the bottom line, M-Pesa built on their existing mobile credit sellers, turning them into \u201cmobile money agents\u201d with very limited investment and additional costs.<\/p>\n

The impact on community was also impressive: in rural Kenyan households which adopted M-PESA, average income increased by 5-30%[11]<\/a>. In addition, the availability of a reliable mobile-payments platform\u00a0led to a huge increase in the number of start-ups in Nairobi.<\/span><\/p>\n

Potential for improvement <\/u><\/strong><\/p>\n

Critics point out that the advanced technology was not the reason why M-Pesa was so successful. Some experts said that M-Pesa was \u201cbuilt mostly on a favorable regulatory and technological environment absent in other markets. [\u2026] For things to work, you need a country with supportive regulation and reversals in cultural attitudes that often view money as meaning cash<\/em>“[12]<\/a>.\u00a0 In addition, in other countries with less favorable regulation dynamics, M-Pesa was far less successful.<\/p>\n

Moreover, the barrier-to-entry to this market is very low. Today, many banks are designing services with lower technological requirements and easier offerings. For instance, in 2012, Barclays introduced \u201cPing-it\u201d (Exhibit 3), a payment method that allows one to send or receive up to \u00a3300 a day to or from other people, just by using a mobile phone number. Its success was impressive, with more than one million downloads in the first six months.<\/p>\n

Exhibit 3<\/p>\n

\"mp4\"<\/a>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\"mp5\"<\/a><\/p>\n

In front of such challenges, will M-Pesa manage to leverage its first mover advantage and achieve enough technological improvement to become a sustainable leader?<\/p>\n

(796 words)<\/p>\n

[1]<\/a> Rachel Bostman, \u201cMobile money: the African lesson we can learn<\/em>\u201d, quoting a survey conducted by the Gates Foundation, the World Bank and Gallup World Poll<\/p>\n

[2]<\/a> Rachel Bostman, \u201cMobile money: the African lesson we can learn<\/em>\u201d<\/p>\n

[3]<\/a> http:\/\/www.worldbank.org\/en\/news\/press-release\/2015\/04\/15\/massive-drop-in-number-of-unbanked-says-new-report<\/a><\/p>\n

[4]<\/a> \u201cMobile banking hailed as a key driver for financial inclusion in Africa<\/em>\u201d, Africanews: http:\/\/www.africanews.com\/2016\/09\/21\/mobile-banking-hailed-as-a-key-driver-for-financial-inclusion-in-africa\/<\/a><\/p>\n

[5]<\/a> Beth Cobert, Brigit Helms, and Doug Parker, \u201cMobile money: Getting to scale in emerging markets\u201d, McKinsey & Company<\/p>\n

[6]<\/a> Nick Hughes and Susie Lonie, \u201cM-PESA: Mobile Money for the \u201cUnbanked\u201d. Turning Cellphones into 24-Hour Tellers in Kenya<\/em>\u201d<\/p>\n

[7]<\/a>\u201cAssessing Regional Integration in Africa IV<\/em>\u201d, Economic Commission for Africa, African Union, ADB, 2010<\/p>\n

[8]<\/a> http:\/\/www.economist.com\/blogs\/economist-explains\/2013\/05\/economist-explains-18<\/a><\/p>\n

[9]<\/a> Nick Hughes and Susie Lonie, \u201cM-PESA: Mobile Money for the \u201cUnbanked\u201d. Turning Cellphones into 24-Hour Tellers in Kenya<\/em>\u201d<\/p>\n

[10]<\/a> https:\/\/www.vodafone.com\/content\/index\/media\/vodafone-group-releases\/2016\/mpesa-25million.html<\/a><\/p>\n

[11]<\/a> http:\/\/www.economist.com\/blogs\/economist-explains\/2013\/05\/economist-explains-18<\/a><\/p>\n

[12]<\/a> \u201cAfrica Leading the Way in Adoption of Mobile Banking<\/em>\u201d, Agence France-Presse, 28 April 2015<\/p>\n","protected":false},"excerpt":{"rendered":"

Did you know\u2026 that paying for a taxi ride with your mobile phone is easier in Nairobi than in Athens?<\/p>\n

Did you know\u2026 that the continent with fastest growth in \u201cmobile money\u201d is Africa, a continent (too) often regarded as lagging behind the rest of the world?<\/p>\n

Of the top twenty countries for mobile money usage, fifteen are indeed in Africa[1]. In 2012, the continent\u2019s mobile market was worth more than $50\u00a0billion, i.e. more than the total money sent via mobile in both Europe and North America[2]. M-Pesa, Kenya\u2019s world-leading mobile-money system, played a massive role in this success.<\/p>\n","protected":false},"author":2421,"featured_media":18332,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-18331","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nM-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"M-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Did you know\u2026 that paying for a taxi ride with your mobile phone is easier in Nairobi than in Athens? Did you know\u2026 that the continent with fastest growth in \u201cmobile money\u201d is Africa, a continent (too) often regarded as lagging behind the rest of the world? Of the top twenty countries for mobile money usage, fifteen are indeed in Africa[1]. In 2012, the continent\u2019s mobile market was worth more than $50\u00a0billion, i.e. more than the total money sent via mobile in both Europe and North America[2]. M-Pesa, Kenya\u2019s world-leading mobile-money system, played a massive role in this success.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2016-11-18T19:50:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mp6-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"660\" \/>\n\t<meta property=\"og:image:height\" content=\"439\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/\",\"url\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/\",\"name\":\"M-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mp6-1.jpg\",\"datePublished\":\"2016-11-18T19:45:13+00:00\",\"dateModified\":\"2016-11-18T19:50:44+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/#primaryimage\",\"url\":\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mp6-1.jpg\",\"contentUrl\":\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mp6-1.jpg\",\"width\":660,\"height\":439},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/d3.harvard.edu\/platform-rctom\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"M-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/d3.harvard.edu\/platform-rctom\/#website\",\"url\":\"https:\/\/d3.harvard.edu\/platform-rctom\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"M-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/m-pesa-when-mobile-money-revolutionizes-banking-in-africa\/","og_locale":"en_US","og_type":"article","og_title":"M-Pesa: when \u201cmobile money\u201d revolutionizes banking in Africa - Technology and Operations Management","og_description":"Did you know\u2026 that paying for a taxi ride with your mobile phone is easier in Nairobi than in Athens? 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