An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem

While it has often been described as a money transfer product, when mobile money reaches scale it can also be seen as a network infrastructure and platform facilitating the exchange of cash and electronic value between various economic actors including clients, businesses, the government, and financial service providers. This paper documents what may be the early stages of just such a transformation in the market for retail financial services in Kenya, where the M-PESA mobile money product has achieved the scale necessary to form an infrastructure backbone to the financial system.

Investigations of over 90 financial institutions uncovered:

• Significant integration of mobile money into the product and services offered by financial institutions in Kenya;
• An ecosystem of firms have sprung up to facilitate the technical integration of existing financial institutions’ back end systems with the new mobile money platform;
• There are a number of innovative new businesses and “pure play” startups which operate solely over the mobile money platform.

However, significant barriers remain which block the development of a more fully developed ecosystem. These include:

• The high price of money transfers;
• The difficulty of integrating to the mobile money interfaces (especially that of M-PESA);
• Firms wishing to outsource their day-to-day cash transactions with clients to the mobile money system must find new opportunities for interactions with their clients to reinforce rapport, build trust, educate, and cross sell new products.