5 more things they didn’t tell you about m pesa

Cover Mpesa myths

Despite a fair number of attempts at elaborately fleshing out Mpesa for readers, in this article I outline 5 more things left out  by:

Claudia McKay & Rafe Mazer did an article for the CGAP titles “10 Myths About Mpesa: 2014 Update” – a follow up to a previous article by Claire Alexandre “10 things you thought you knew about Mpesa”. In both of these articles, 5 crucial things were left out that you should know about!

Mpesa is used on a contractual basis from Vodafone Group.

M-pesa is not a Kenyan invention, by any stretch. M-pesa is owned by Vodafone Group, was partly funded by the UK DFID, conceptualized by Nick Hughes – an executive at Vodafone – in 2003 and finally project managed by Susan Lonie – an m-commerce expert – from pilot to commercial operation.

A confluence of factors – fashionable sustainable development, microcredit prospects in East Africa and a willing mobile network operator, Safaricom – meant that Kenya was a hotbed for testing a pilot. [Read more…]

10 differences between Mpesa and Bitcoin

Bitcoin vs Mpesa featured image

Centralized – Decentralized

Mpesa is a centralized electronic money system owned by Vodafone. All transactions are settled on a centralized ledger on a central server.

Bitcoin is a decentralized electronic value transfer network owned by no one. All transactions occur on decentralized ledger on a distributed network.

Pegged to local fiat on 1:1 ratio – Free floating market price

KES 200 cash for MPesa KES 200 on a feature phone

Digital currency Mpesa is issued money, fully (100%) backed by liquid reserves on a 1:1 ratio. For every Mpesa unit in mobile wallets, there is matching fiat held in trust. The value is fixed.

Bitcoin is NOT backed by anything and derives its price from a free floating market exchange. Its value changes with market sentiments.

[Read more…]

Digital payments in East Africa (Part I): Card payment alternatives

Card payment alternatives in Kenya by pesa-africa

Card payment alternatives in Kenya by pesa-africa

Kenya and East Africa are actively transitioning to cashless payments systems. East Africa’s economies are largely cash based informal economies with its associated costs. Challenges in aggregating national transaction data, consumer spending patterns, tax administration there is really no shortage of incentives.

With no means to track sales, little data is available, and channels are too fragmented for companies to forecast production and distribution with any degree of accuracy.
Niti Bhan

Policy makers, governments, central bankers and the private sector are looking to cash in on the benefits of culturing digital payments for the Kenyan market; a variety of emoney and digital currency payment options thrive in Nairobi – the capital.

Central Bank of Kenya data reveals a total of 10million cards in circulation as at January 2013 in the local card payments industry.

Here is a basket representative of card payment alternatives in Kenya. [Read more…]

Why isn’t Africa adopting Bitcoins massively for money-transfers?

Bitcoin adoption in Africa, not what you expect

Answer by Michael Kimani:

There’s a lot of variables in play before bitcoin can be used for money transfer on a significant scale. I’ll outline a few.

[Read more…]

Pesabit #004 : Equity Bank & Safaricom Run Neck and neck over SIM Overlay

Safaricom Equity Bank Historical profit COmparison Chart

In the past 3 months, two juggernauts in Kenya have clashed over the introduction of SIM overlay technology into the market – Equity Bank Group (Bank) and Safaricom ltd (Telco).  Safaricom  Ltd.  the largest Mobile Network Operator in Kenya (67.9 % market share) while Equity bank is the largest bank by customer base (8 million +).

As the incumbent mobile financial services provider, Safaricom faces a direct threat to its dominant sway, MPESA from A controversial SIM overlay technology set to be introduced by Equity Bank into the market through its subsidiary Finserve. Equity bank made a strategic move in acquiring an MVNO license from the regulators, Communications Authority of Kenya. Through this license, Equity can venture into the cellular network business and more crucially, the mobile financial services business – MPESA’s turf.

By leveraging its proprietary ownership of the SIM, Safaricom has continued to lock out financial services firms from its service platform; effectively acting as gatekeeper. The trouble is

A single mobile device is not supposed to be restricted to a single service provider, especially when different service providers having the mutual business interest over a single mobile phone users

It is easy to see why it has been labeled a monopoly and followed by cries to open up their platform. The mobile phone is a clear winner as a form factor in East Africa. Knowing this, financial services firms have been itching to catch up after losing out years back to Telcos. [Read more…]

PesaBit #003 : Why the Matatu Cashless payment initiative failed

bebapay-googleafrica-tweetA little more than a year ago, Equity Bank and Google partnered to offer Nairobi commuters NFC based prepaid cards and simultaneously equipped matatu touts with android phones accepting NFC payments. No issuing, acquiring and transactions fees were involved; matatu owners now had an auditable tool to aggregate daily collections straight into their bank accounts. In light of Kenya’s fast tech based economy, on paper and high up in the boardrooms, this was ostensibly a brilliant idea.

Today, the online business daily ran a title “Family bank joins quest for cashless fare license”. The Kenyan Government has been keen to formalize the 218 Billion ($ 2.44 billion) public transport industry – matatus (collectively, vans and buses). Despite its obvious far reaching implications on curbing corruption, inefficiency, regulation and taxation– the move hit a snag and I wonder if Family Bank have an alternative to where its predecessors – Equity Bank and Google fell short. [Read more…]

PesaBit #001: 7 Reasons why East Africa is a Mobile payments and FinTech HotBed

Image credit: abmagazine

Image credit: abmagazine

Kenya and broader East Africa will lead digital finance and digital currency innovation in Africa. Going forward, I expect financial services and Technology (FinTech) in Sub Saharan Africa activity in Kenya to tap into mobile phones and mobile devices as a form factor.



7 reasons why I tip mobile payments and mobile financial services [Read more…]

Bitcoin Takes On Remittances Incumbents in Kenya: BitPesa vs. MTOs


Image: Cointelegraph

Image: Cointelegraph

The World Bank expects cross border remittances by international migrants to developing countries to total $436 billion this year. Growth is expected to boost this to $516 billion in 2016.  Remittances play a big role in the beneficiary countries: in both monetary and human development terms (health, education, social). Its impact on economic growth and poverty reduction is extensively documented.pdf. Sub Saharan Africa, where inbound remittances totaled $32 billion (2% of GDP), is no different. Nigeria ($21 billion) & Egypt ($17 billion) top the recipient list in Africa. Remittances in SSA are far more stable than FDI and private financing inflows. Remittances to Kenya totaled $1.2 billion.

“The increased financial weight of remittances in external flows to Africa and the positive role that remittances can play in Africa’s development have brought about heightened attention to the topic among policymakers.”Mthuli Ncube et al

[Read more…]

The Role of Regulators in Mobile Money Deployment

PREAMBLEmobile runner

Mobile Money (MM) is hailed for accelerating financial inclusion and its potential for reining in an even greater multitude of unbanked global citizens into the formal financial systems. To harness its potency, policy and regulatory environments hold the key to exhausting its potential. It falls within the domain of Telecommunications and Financial Regulators/ Central banks. Central banks have asserted their regulatory authority in more recent times as Mobile Money (MM) has emerged as a remedy for financial exclusion risk. Central Banks in developing countries, including Sub Saharan Africa, are keen on leveraging MM to further their cause.

First, it’s important to state that Central Banks in emerging economies have a vast and vested interest in the success of mobile payment services. Indeed, as mentioned above, mobile payment services can contribute directly to the economic growth of the country – GFG group

Regulating MM presents simultaneous challenges and profound benefits. Regulatory and policy objectives have to be balanced with sensitive competitive market dynamics. Restrictive regulation can stifle competition, innovation and market adoption.

The importance of policy and regulatory frameworks in mobile banking development has inspired empirical research reports on the subject  such as What Regulatory Frameworks Are More Conducive to Mobile Banking? – World Bank. A 2013 GSMA report, titled Mobile Money: Enabling regulatory solutions, broadly categorized aspects encompassing all pertinent areas of MM regulation. [Read more…]

Money Chasing Mobile: The Threat of Telcos’ Mobile Money to Banks and Card Companies in East Africa

equitympesa2In early March, in an unusual collaborative move, Kenya’s two largest telecoms operators, Safaricom (66.5% market share) and Bharti’s Airtel (17.5% market share), made a joint $100 million bid for the third largest operator, Essar Communications, YuMobile (8.1% market share). Media reports claimed the two would split the spoils; Safaricom would take up Yu’s infrastructure network and Airtel Yu’s 2.7 million subscribers, boosting its market share up to 25% from 17.6%. Reports suggested that Equity Bank had expressed interest in rolling out mobile services and YuMobile’s existing network offered an enticing option. Equity Bank, the largest bank in the region, boasting 8 million customers, is hailed for reining in small and rural customer deposits in its inception years, catapulting it to the helm of the financial services industry. Nakumatt, Mobile Pay and Zioncell were also mentioned as showing interest. Orange, the smallest player by market share (7.1%), is speculated to be planning a wind up of its operations; a move likely to shake up the industry in this region.

Kenya is widely recognized as a model case for mobile banking impetus, apparent from its

An Mpesa Agent with a User in Kenya

An Mpesa Agent with a User in Kenya

ubiquitous mentions at conferences and conversations on the same. 18.6 million registered and 11.6 million active users, a larger base than any other banking institution in Kenya. See more facts here. Concerted efforts to replicate this model of financial inclusion in neighboring Somalia and other developing countries, was actualized with relative success. Zaad, a mobile money service offered by Telesom, the largest mobile phone company in Somalia, averages 34 transactions a month, higher than most places around the world. Bringing in the unbanked population into the formal financial system has far reaching desirable impacts for governments and central banks. Mobile banking has effectively allowed developing economies to leap frog traditional brick and mortar models of banking and achieve a more inclusive financial system – faster. [Read more…]