Mpesa App: Transformed Payments in Kenya

Mpesa is a mobile phone-based money transfer service that has revolutionized payments and financial services in Kenya. Launched in 2007 by Safaricom, Kenya’s largest mobile network operator, Mpesa has grown to become the most successful mobile money service globally.

An Overview of Mpesa and Its Features

Mpesa allows users to deposit, withdraw, and transfer money easily using a simple menu on their mobile phones. Here are some of the key features of Mpesa:

• Deposit and withdraw money: Mpesa users can deposit and withdraw cash at a network of over 100,000 agents across Kenya. These ‘Mpesa shops’ allow users to convert cash into virtual Mpesa money and vice versa.
• Transfer money to other users: Users can transfer money to other Mpesa users by simply entering the recipient’s number and the amount. Transfers are instantaneous.
• Pay bills and buy goods: Mpesa can be used to pay utilities, and school fees, make purchases, and more. Businesses and organizations can integrate with Mpesa to receive digital payments.
• Access credit and loans: Mpesa has partnered with banks and other financial institutions to offer micro-loans and access to credit through the platform.
• Global remittances: Mpesa has partnered with Western Union and MoneyGram to facilitate instant global money transfers. Diaspora remittances are a major use case.

The Origins and Exponential Growth of Mpesa

Mpesa was launched in March 2007 as a small pilot project between Safaricom and Vodafone. The original aim was to create a service that allowed microfinance borrowers to receive and repay loans via mobile phones. However, during the pilot, users began transferring airtime credits to other users as a form of money transfer. This led to Mpesa pivoting to become a general mobile money transfer service.

The service saw immediate traction, gaining over 20,000 users in the first month. By September 2007, there were nearly 150,000 registered Mpesa users. The exponential growth continued, with Mpesa reaching 1 million users by 2008. By 2011, Kenya had more mobile money users than bank account holders. As of 2022, over 60% of Kenya’s adult population uses Mpesa regularly.

Today, Mpesa processes over $750 million daily in transactions with over 40 million active users in Kenya alone. Mpesa has also expanded to Tanzania, Mozambique, Lesotho, Ghana and Egypt. It is considered an inspiration for mobile money services globally.

Key Reasons for Mpesa’s Phenomenal Success

Several factors enabled Mpesa to disrupt financial services and achieve widespread adoption in Kenya:

Large Unbanked Population

Before Mpesa, a majority of Kenya’s population did not have access to banking and formal financial services. Mpesa presented an opportunity to bring affordable money transfer services to the masses. The simplicity and affordability of Mpesa attracted users rapidly.

Agent Network

Safaricom leveraged its vast network of airtime resellers across Kenya as Mpesa agents. This ensured users had cash deposit and withdrawal points conveniently located within their communities. The robust agent network was key for adoption.

Trust in Safaricom Brand

As Kenya’s largest telco, Safaricom already had strong brand recognition and trust. Kenyans were comfortable adopting Mpesa quickly given the Safaricom brand’s reputation.

User-Friendly Technology

Mpesa’s technology, based on a simple SMS and SIM toolkit, worked seamlessly across all types of phones. Its menu-based interface was easy for non-tech-savvy Kenyans to understand and use.

Regulatory Support

Safaricom was able to work closely with the Central Bank of Kenya in Mpesa’s early days to create a supportive legal and regulatory framework. This gave credibility and accelerated adoption.

The Impact of Mpesa on the Kenyan Economy and Society

Over the past 15 years, Mpesa has had profound implications on Kenya at both an economic and social level. Here are some of the key impacts:

Financial Inclusion

Mpesa has brought formal financial services to millions of unbanked and underbanked Kenyans. An estimated 75% of Kenyan adults now use mobile money services like Mpesa regularly. The increased financial inclusion has major economic benefits.

Business Growth

Mpesa has enabled new business models powered by digital payments. More Kenyan businesses can now accept digital payments from customers. Mpesa’s payments infrastructure has fostered the innovation and growth of e-commerce startups.

Employment Opportunities

The extensive Mpesa agent network has created income-generating opportunities for over 200,000 Kenyans working as Mpesa agents across the country. Youth empowerment is a major social benefit.

Improved Quality of Life

By increasing access to money transfer services, Mpesa empowers users and improves their quality of life. Users can instantly send money to relatives, pay emergency medical bills, school fees, etc. Urban-to-rural remittances are a major use case.

Macroeconomic Uplift

According to World Bank estimates, Mpesa contributes an estimated 25-40% of Kenya’s GDP growth. The impact on business activity and financial inclusion contributes greatly to the broader economy.

Key Players in Kenya’s Mobile Money Ecosystem

While Mpesa was the pioneer, Kenya now has a vibrant mobile money ecosystem with many players offering innovative services:

• Safaricom – The pioneer and market leader with Mpesa controlling over 70% market share. Also offers microloans, savings, and insurance via Mpesa.
• Airtel Money – Second largest provider with around 10% market share. Key rival to Mpesa.
• T-Kash – Mobile money offering by Telkom Kenya focused on affordability. Has around 5% market share.
• Equitel – Mobile money platform from Equity Bank enabling integration of banking and payments.
• Banks – Major banks like KCB, Cooperative, and NCBA provide mobile banking and payment services combined with Mpesa integration.

Emerging Fintech Innovations

Kenya has an active fintech scene leveraging the foundations laid by Mpesa:

• Lending apps provide micro-loans via mobile phones. For example, Tala, Branch, Lidya.
• Investment apps like Chamasoft and Pezesha enable micro-savings and investments.
• Fintech startups like Ukheshe integrating QR code payments for merchants.
• Insurtech startups like Bima Afya provide micro-insurance via mobile phones.

Looking Ahead: The Future of Mobile Money in Kenya

Mpesa and mobile money have transformed finance over the past 15 years in Kenya. However, there are still millions who remain unbanked presenting major growth opportunities. Here are some predictions for the future:

• Deepening smartphone and mobile internet penetration will enable more advanced fintech solutions beyond basic SMS services.
• The success of mobile lending apps indicates the potential for more credit scoring and underwriting innovations to increase financial access.
• New technologies like blockchain and cryptocurrencies could find unique use cases in Kenya.
• Broadening services beyond just payments and transfers into wealth management and investments fintech.
• Tighter integration between mobile money platforms and traditional banking providers.
• Regulatory reforms to create standards for interoperability and cooperation between different mobile money platforms.
• Expanding agent networks deeper into rural areas will remain a priority.
• Increased adoption by SMEs and businesses across agriculture, retail, transport, and other sectors.

5 FAQs About Mpesa in Kenya

1. Does Mpesa require a smartphone to use?

No, Mpesa works on any type of mobile phone via the SIM toolkit and USSD menus. No internet or smartphone is required. This enabled wide accessibility.

1. What identification is required to register for Mpesa?

To register, you need a Safaricom SIM card and a valid government ID such as a national ID or passport. Mpesa agents facilitate registration.

1. How safe and secure is Mpesa?

Mpesa implements stringent security measures including PIN-protected transactions, encryption, and account limits. Safaricom also offers guarantees on funds.

1. What are the charges for using Mpesa?

Sending money is free for amounts below Ksh100. Above that, Mpesa charges a small transaction fee that varies based on the amount sent. Withdrawals incur a fee.

1. Can non-Kenyans living abroad use Mpesa when visiting Kenya?

Yes. You can register for Mpesa using your passport when you arrive in Kenya. This enables you to send, receive, and withdraw money conveniently.

Conclusion

In conclusion, Mpesa has been an extraordinary success story that showcases how technology can transform financial services in emerging markets. It has accelerated financial inclusion, economic growth, and quality of life for millions of Kenyans. While challenges remain, the future is bright for Kenya to build on the foundations laid by Mpesa to become a global fintech hub. The model inspires other developing countries seeking to drive financial access through mobile technology.