Mobile Payments Go Viral: M-PESA in Kenya

M-PESA is a small-value electronic payment and store of value system that is accessible from ordinary mobile phones. It has seen exceptional growth since its introduction by mobile phone operator Safaricom in Kenya in March 2007: it has already been adopted by 11.9 million customers (corresponding to 54% of Kenya’s adult population) and processes more transactions domestically than Western Union does globally.

M-PESA’s market success can be interpreted as the interplay of three sets of factors: (i) pre-existing country conditions that made Kenya a conducive environment for a successful mobile money deployment; (ii) a clever service design that facilitated rapid adoption and early capturing of network effects; and (iii) a business execution strategy that helped M-PESA rapidly reach a critical mass of customers, thereby avoiding the adverse chicken-and-egg (two-sided market) problems that afflict new payment systems.