Riding the M-PESA Rails: Advantages & Disadvantages

This note analyzes the advantages and disadvantages to both customer and financial institutions of linking with M-PESA. It concludes by describing consequences of the difficulties that financial institutions face with M-PESA.

MicroSave’s recent research with fourteen financial institutions in Kenya revealed perceived opinions about advantages and disadvantages of linking with M-PESA. Findings indicated that:

• Banks, MFIs and Deposit Taking Microfinance Programs look for cost reduction, increased staff efficiency and customer convenience, which may lead to more transactions;
• M-PESA helps customers to cut costs, increase convenience and reduce risk of carrying cash by allowing them to transact their accounts from the nearest M-PESA agent, instead of travelling to a bank branch;
• Financial institutions are facing difficulties in reconciling deposits initiated by M-PESA users to customers’ accounts;
• Banks are delaying informing customers that money has been credited to their account;
• Customers are also finding it difficult to make withdrawals from a bank account using the M-PESA channel.

Institutions that have agreements with M-PESA are not heavily promoting the opportunity, despite potential benefits, as a result of these difficulties. Financial institutions are looking for alternative arrangements to mitigate the challenges of linking with M-PESA.