Why we should Slay Mpesa, and save the town

article2Kenya and east africa’s mobile money systems are overly reliant on Telco’s networks and SIM modules. The status quo is detrimental to Banks, Non-banking financial institutions and a whole host of digital token value services e.g sports betting and prepaid electricity tokens.

Telcos, now Mobile Money Operators, are a Banks wet dream. Peer to peer money transfers in Kenya almost always route through a mobile network operator’s SMS, SIM card and USSD channels; they are the gatekeepers.

It is a cause for concern for competition, communication and money regulators

“because MNOs compete with banks and other MFS providers (third parties) in the provision of mobile payments, [and] also own key communications infrastructure required to provide mobile payments.”

Where’s the problem?

Telcos’ Proprietary control of the SIM has steered industry to USSD channel as a mobile financial services gateway. So now, the market is confined to a limited set of access channels all requiring gate passes from Telcos, such as Safaricom. In the process, its product Mpesa has drifted to the heart of digital financial services.


I have blogged about How Kenyan Banks Lost to Mpesa partly because of the SIM Module. The drawbacks of reliance on USSD channels was partly highlighted by CGAP’s, Promoting Competition in Mobile Payments: The Role of USSD.

The state of affairs is absurd

Today, Cooperative Bank’s MCo-op Cash mobile banking service, relies 100% on a clunky USSD point of access and SMS. On top of Safaricom’s Mpesa charges, your average Kenyan SACCO incurs charges from another 3rd party service Spotcash,

“a service for withdrawing and depositing money into one’s SACCO account using mobile phones sms and USSD (*645#) services. To register, you need to have a savings/FOSA account with the SACCO and be a registered MPesa user”

Time for some mobile internet?

Mobile internet is a less discussed alternative channel.

Mobile internet is open for all, a permissionless channel with no gatekeepers. Issuing electronic money can be accomplished over Internet Protocols (IP), with all the benefits (even better) of traditional mobile network operators at a reduced cost. It bypasses the current model of needing Telcos for emoney issuance.

How would it work?

With money over IP issuance, financial institutions, retailers, payment companies, sports betting firms, the Treasury etc have an equal footing at exploiting it for issuing and redeeming electronic money or digital assets.

Michael Baumann’s Open Source Mobile Money System for financial inclusion offers a great example of a secure out of the box solution for issuing electronic money/assets, the Open Assets Protocol built on the Bitcoin blockchain.


I am currently exploring the feasibility of this model in Kenya. Here, we are extremely fortunate the painful groundwork required for launching digital assets has been well covered by existing policy and mobile money operators. To mention a few

  • Kenyans already familiar with  digital value tokens – Mpesa, prepaid meter tokens, bonga points, MAkiba mobile infrastructure bond issuance
  • A guideline framework for issuing electronic money by the regulator, Central Bank of Kenya
  • A distributed non-exclusive mobile money human agent network
  • An obvious need for secure low cost alternatives
  • A tried, tested and documented business model for “De-materialising” cash into electronic money float.


Frankly, the solution to Mpesa dominance lies in plain sight. So why not money over IP?






  1. Your link to Michael Baumann’s page is invalid. Did you mean this page?: https://michaelbumann.com/posts/2015-12-21-building-an-open-source-mobile-money-system-for-financial-inclusion/


  1. […] to the SIM, IP blockchain wallets are a great forward-thinking alternative. I have written about here, as a feasible emerging […]

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