February 25, 2019
M-Pesa is a mobile phone-based money transfer, financing, and microfinancing service. It was launched in 2007 by Vodafone for Safaricom (Kenya) and Vodacom (Tanzania), the largest mobile network operators in their respective countries. As of today, M-Pesa has expanded to many countries including Afghanistan, South Africa, and India.
M-Pesa is operated by mobile network operators (MNO) Safaricom and Vodacom. Unlike banks or credit unions, these operators are not classified as deposit-taking institutions. M-Pesa customers can deposit and withdraw money from a network of airtime resellers and retail outlets acting as banking agents. M-Pesa enables its users to:
Send money to any mobile number (only full KYC customers)/digital Wallet
Send money to any bank account (only full KYC customers)
Postpaid bill payments
Partnerships with Kenyan banks offer expanded banking services like interest-bearing accounts, loans, and insurance. The user interface technology of M-Pesa differs between Kenya’s Safaricom of and Tanzania’s Vodacom, although the underlying platform is the same.
The active user base of M-Pesa has grown from approximately 1 million active users in 2007 to 33.4 million active users in 2018. This amounts to 37% in compounded annual growth rate.
**Kenya: **M-Pesa has the strongest foothold in Kenyan markets. M-Pesa was launched by Kenyan mobile network operator Safaricom in March 2007 with Vodafone being a minority shareholder (40%) in Safaricom. After its launch, M-Pesa soon captured a significant market share for cash transfers. In 2008, M-Pesa’s Send Money Home campaign won the ‘Best Broadcast Commercial’ award at the 13th Annual GSMA Global Mobile Awards in Barcelona, Spain. It also won the award for ‘Best Use of Mobile for Social & Economic Development.’ In the same year, M-Pesa was recognized as the ‘Best Project’ in the Economic Development Category of the Stockholm Challenge Awards. By December 2011, M-Pesa grew to 17 million subscribers in Kenya alone. The formal banking service of Kenya made an unsuccessful attempt to slow the growth of M-Pesa by lobbying with the Kenyan finance minister to audit M-Pesa. However, no faults were found in M-Pesa services. In November 2014, Safaricom launched its companion Android app called Safaricom M-Ledger for its M-Pesa users. The application gives M-Pesa users a historical view of all their transactions. On February 18, the Google Play store started taking payments for apps via Kenya´s M-Pesa service. In January 2019, Safaricom launched Fuliza, M-Pesa’s overdraft facility.
Tanzania: M-Pesa was launched in Tanzania by Vodacom in 2008 but it didn’t get very popular in the country, which led to Vodacom implement strategic changes to improve its market position. As of May 2013, M-Pesa in Tanzania has five million subscribers.
Afghanistan: In 2008, Vodafone partnered with Roshan (Afghanistan’s primary mobile operator) to provide M-Pesa, the local brand of the service. The service was initially used to pay policemen efficiently so as to prevent defections to the Taliban, who were previously capable of paying higher salaries to woo people to join their ranks. M-Pesa had uncovered rampant corruption in the previous model where salaries were being paid to ghost police officers who did not exist, implying their salaries were being stolen by others. Moreover, under the old system, policemen were being underpaid due to corrupt practices. The service has been so successful that it has been expanded to include limited merchant payments, peer-to-peer transfers, loan disbursements, and payments.
South Africa: In September 2010, Vodacom and Nedbank announced the launch of M-Pesa in South Africa. The service was expected to be popular because it was estimated that South Africa had 13 million economically active people without a bank account. However, M-Pesa could not get the desired foothold because of the tough regulatory environment in South Africa with regard to customer registration and the acquisition outlets. The lack of understanding of the product was another reason for M-Pesa’s underperformance. Efforts to reposition the product were also not successful – as of March 2015, South Africa lagged behind Tanzania and Kenya with only approximately 1 million subscribers. In May 2016, Vodacom announced that it will be scrapping M-pesa from South Africa.
India: M-Pesa was launched in India by Vodafone through its wholly-owned subsidiary Vodafone M-Pesa Limited (VMPL) in association with ICICI Bank. VMPL has been authorized by the Reserve Bank of India (RBI) under the Payment & Settlement Systems Act 2007 for setting up and operating a payment system in India. VMPL is also a business correspondent for ICICI Bank. M-Pesa is a registered trademark of Vodafone and is available across India.
**Other markets: **In 2013, M-Pesa expanded into Mozambique, Lesotho, and Egypt. M-Pesa expanded into Romania later in 2014.