Banking in the M-PESA Age: Lessons from Kenya

This Working Paper explores the key strategies banks in Kenya have used to respond to mobile money. The strategies discussed include direct competition over a mobile channel, such as through Equity Bank’s mobile product Equitel; collaboration with mobile money providers to offer banking services, such as through Commercial Bank of Africa’s M-Shwari; and industry coordination to create alternatives to existing mobile money products, such as the small-dollar interoperability scheme introduced by the Kenya Banker’s Association. 

Each approach demonstrates that, while nonbank mobile financial services can fundamentally reshape the financial sector in a developing market, as they have clearly done in Kenya, mobile services need not represent an existential threat to the traditional banking industry. In fact, the reach of models such as M-PESA can enable and even incentivize innovation in the banking sector, including a shift in focus to increasingly lower-income consumers. Kenya’s experience shows, above all, that retail banks can thrive in the face of mobile money, as long as they are prepared to adapt.