Mobile Banking:the most developed mobile payment system in the developing world from Kenya

The initial concept of M-Pesa was to create a service which allowed microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers.This would enable microfinance institutions (MFIs) to offer more competitive loan rates to their users, as there is a reduced cost of dealing in cash. The users of the service would gain through being able to track their finances more easily. But when the service was trialled, customers adopted the service for a variety of alternative uses and complications arose with Faulu, the partnering MFI. M-Pesa was re-focused and launched with a different value proposition: sending remittances home across the country and making payments.

M-Pesa is a branchless banking service, meaning that it is designed to enable users to complete basic banking transactions without the need to visit a bank branch. The continuing success of M-Pesa in Kenya has been due to the creation of a highly popular, affordable payment service with only limited involvement of a bank.

M-Pesa customers can deposit and withdraw money from a network of agents that includes airtime resellers and retail outlets acting as banking agents. M-Pesa is operated by Safaricom, a mobile network operator (MNO), which is not classed as a deposit-taking institution (such as a bank). Therefore, M-Pesa may not be advertised as a banking service.

The service enables its users to:

§  Deposit and withdraw money

§  Transfer money to other users and non-users

§  Pay bills

§  Purchase airtime

§  Transfer money between the service and a bank account (in some markets) 

The user interface technology of M-Pesa differs between Safaricom of Kenya and Vodacom of Tanzania, although the underlying platform is the same. While Safaricom uses SIM toolkit to provide handset menus for accessing the service, Vodacom relies mostly on USSD to provide users with menus, but also supports STK.