In 2009 I spent several months in rural Kenya volunteering with an independent community development non-profit, working with a small group of women engaged in a microfinance program. To make regular savings deposits of generally 75 KSH (~$1 at the time) into the pseudo ‘bank,’ some women would travel miles, by foot and/or Matatu, to the orphanage I worked with running the program. The time and effort participants invested into making savings deposit highlights the dearth of participation in traditional financial institutions in Kenya, but also speaks to why Kenya emerged as a world leader in mobile payments and increasingly full service mobile banking.
As noted in The Economist and elsewhere, M-PESA, the mobile payments service launched in 2007 by the Nation’s largest mobile-network Safaricom, is used by an astounding 70% of the adult population. Indeed each of the women in the microfinance program had a mobile phone and actively used M-PESA for person to person (P2P) mobile transfers. The below graphics from MasterCard’s Mobile Payments Readiness Index study highlights Kenya’s leadership in mobile money adoption, specifically P2P, with the United States highlighted for comparative purposes (Kenya is the “Leading Country” plotted in each category for P2P):
A side by side comparison of the U.S. and Kenya on total Mobile Payments awareness and adoption draws an equally stark contrast:
Kenya’s rise as a mobile money pioneer is the product of a ‘perfect storm’ of several key factors:
- Customer: High mobile phone adoption and high demand given the financially and time intensive alternative methods (see the journey of the microfinance participants above) and low bank penetration in rural areas
- Provider Infrastructure: Safaricom is the by far the dominant mobile provider, a corporate bedrock in East Africa, and a widespread network of mobile minutes purveyors (over 100,000 versus fewer than 1,000 bank branches) were able to be leveraged as agents to perform cash in/out M-PESA transactions
- Regulatory: Kenyan regulators allowed Safaricom to proceed with M-PESA without formal approval
In subsequent posts each of these factors, as well as Safaricom’s expansion into full service mobile banking, M-Shwari, offering savings and credit functionality, will be reviewed in turn. A compare and contrast with comparable market dynamics in the U.S., notably with respect to the un/underbanked, highlight mobile banking as ‘table stakes’ functionality – now – for institutions of all sizes.