Analysis of Financial Institutions Riding the M-PESA Rails

This study explores the advantages and disadvantages, including price considerations, for M-PESA customers, M-PESA agents, and financial institutions. It also assesses whether M-PESA contributes to financial inclusion of participating financial institutions and customers. MicroSave designed and conducted this study at the request of the Bill & Melinda Gates Foundation to understand M-PESA’s strengths and problems and derive lessons for other mobile money services.

M-PESA is a part of Safaricom, Kenya’s largest mobile operator. M-PESA has a network of 28,000 agents and serves more than 14 million customers in Kenya. Over 75 financial institutions in Kenya, including banks, microfinance groups, insurance and pension plans, and savings and credit cooperatives work with Safaricom to offer mobile banking to their customers. Most of these institutions offer deposit services over the M-PESA platform. Findings include:

• M-PESA offers banks the benefits of reduced operational costs and increased staff efficiency;
• M-PESA offers customers greater convenience and personal control;
• Problems associated with M-PESA include incompatible software and limited middleware for financial institutions and Safaricom’s respective systems;
• Other problems include customer data-entry errors, money transfer and reconciliation delays, and lack of transparency on customer fees.