“M-PESA”: that is a name in global fintech history that can never be erased. Not that anybody would want to. Forever it will be the perfect example of a viable financial ecosystem based on rules unthinkable before. A living masterpiece that was created by a mosaic of unique circumstances, choices and risks taken at a particular time and place, and that continues to evolve in the changes it brought to the country.

Since I’m neither a local, nor deeply involved with the African markets (yet), I would not dare to simply impose my DIY analytics on my readers. Instead, I invite you to listen to my conversation with M-PESA’s own Kevin Amateshe reflecting on Kenya’s digital financial services space, M-PESA’s role, the past, present and future: https://youtu.be/QlZuKwnsAS4

Carrying on from the video part, let us have a deeper look at M-PESA.

Let me place you in historical context. M-PESA mobile wallet was born in 2007 as a bold pilot by Safaricom (part of UK’s Vodaphone) which was dominant in Kenya with 77% market share. It got a grant to get unbanked people, well, banked. The banks in Kenya at that time were a far reaching idea for many. People almost always used cash. A lot of time and effort was required to access banks. Worse still, banks were expensive and gave little incentive to use them. And not to mention trivial barriers such as lack of all KYC requirements and required minimum balances cutting off a majority. M-PESA started as a SACCO loan disbursement and repayment tool but quickly took note of customer behaviour in the use of the service. This led to a revamp of the product as a money remittance tool. This key service of sending and receiving money has kept the use of M-PESA dominant to this very day.

What M-PESA basically did was to significantly enlarge its mobile money agent network. Safaricom invested heavily in building its off-the-ground stores and kiosks network, employing, contracting, training and incentivising the agents. The key to success was to get the network so large that anyone could have quick access to agents. The wallet itself back then did not offer a large variety of services, it basically was a digital safe for cash. This cash agent network set-up is not something unique and it is present in many developing markets. In Russia in particular, it evolved to replace agents with the self-service machines connected to the internet for instant cash deposit to wallet accounts and payments for services. This also is now the basis for all local and international money transfer systems, like Western Union.

M-PESA was cheaper than banks, and safer and more convenient than handling cash. The financial inclusion driven by M-PESA has greatly led to the growth of Kenya’s digital economy.

Starting with remittances, Safaricom quickly enriched M-PESA with different use cases and grew to more than 20.6 mln monthly active customers in Kenya and 290,000 active agents in 10 countries. M-PESA’s revenue is $624 mln, and its transaction value is comparable with Kenyan GDP. Safaricom, amongst many other things:

· Partnered with CBA and KCB banks to offer loans with M-SHWARI and KCB M-PESA.
· Empowered merchants to accept M-PESA payments online and offline with Lipa Na M-PESA.
· Brought solar power to off-the-grid citizens with M-KOPA.
· Engaged in a number of projects for agriculture (DigiFarm), healthcare (M-TIBA) and education.
· Launched its own e-commerce website — Masoko.
· Launched a messenger app — Bonga.
· And even a taxi service — Little Cab.

It seems to me, Safaricom is doing what Yandex did and Grab did in their respective regions — start with one service, and once you got customers, do everything else.

CGAP Banking in the M-PESA Age, 2017

M-SHWARI in partnership with CBA and KCB M-PESA in partnership with KCB stand as interesting examples of banks becoming back-end systems with mobile wallets at the front-end. These banks have experienced bank account growth more than any other banks, all thanks to M-PESA. In many cases, M-PESA customer might not necessarily know that they have bank accounts. That is the beauty of future banking, making it subtle in the customer’s life.