M-Pesa

Money, Real Quick: The Story of M-PESA

by Tonny K. Omwansa, Nicholas P. Sullivan and The Guardian  · 28 Feb 2012  · 140pp  · 91,067 words

19 ******ebook converter DEMO Watermarks******* million Kenyans, nearly 70% of the adult population, have signed up for mobile money services. Sixteen million are customers of M-PESA (‘M’ for Mobile and pesa means money in Swahili), the mobile money service offered by Safaricom, the leading mobile operator in Kenya. In 115 years

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-money and vice versa was surprisingly simple. Safaricom identified airtime dealer stores near target areas, and after some explanation most resellers agreed to take on M-PESA. Safaricom had been so successful so fast, acquiring 5 million customers in five years, that airtime agents figured another Safaricom innovation could not fail.

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promise and might work in several of the many emerging markets where it had operations; in fact, Vodafone has since exported M-PESA to Tanzania, South Africa, Afghanistan and India. M-PESA might also form the basis of a low-cost international remittance service. Globally, international remittances are a $400 billion business, fueled

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.” That wish was eventually granted, and Vaughan, who had been in charge of products and services, became the lead manager for and exclusively dedicated to M-PESA. Joseph was quickly becoming a believer. ******ebook converter DEMO Watermarks******* Safaricom was not quite ready for a nationwide rollout. The product functionality was right,

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also convincingly showed that collaborating with Faulu Kenya or any other microfinance institution would be a millstone during a national launch. The consumer proposition for M-PESA was compelling enough that attracting customers would not be a problem. Of course, that consumer proposition had to be spelled out clearly. “Send Money

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ride back to Wajir. While in Nairobi, Fawzia stayed with her daughter and her husband. That was before M-PESA. Now, with M-PESA, Fawzia can send the money in seconds! There are more than 20 M-PESA agents in Wajir. Transport has also improved. Wajir Airport, formerly used just by the military, was opened to

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as those of the many small villages in between, and beyond. If banks are dour and stolid ******ebook converter DEMO Watermarks******* buildings with imposing entrances, M-PESA shops are colorful and eyecatching, located near matatu (small bus) stops and residential neighborhoods, and the doors are often open. Banks are typically open from

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stations and supermarkets and other high-traffic distribution points as agencies, the ******ebook converter DEMO Watermarks******* virtue being that they weren’t dependent on M-PESA for profits but could treat it as just another hot item to sell. Soon enough, as these agencies looked to expand with employees (cash merchants

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backing for loans to agencies at favorable rates. KCB has also agreed to set up overdraft protection for agents’ working capital, to be delivered through M-PESA. An agency’s central functions are to maintain office space, develop signage and marketing, hire employees (using some combination of salary and commissions), and

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able to meet her family needs. Risper is always on her phone, coordinating float-related issues, talking to business partners, interacting with M-PESA cash merchants as well as Safaricom M-PESA staff. She also has to ensure that cash merchants are well trained and know how to handle different situations. With such a

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him get “discipline”. Before, he would pass by the local bar and sometimes spend his entire earnings on cheap liquor. ******ebook converter DEMO Watermarks******* M-PESA has solved many problems for Juma, and, he says, for the “common man.” Juma is grateful that Safaricom charges neither registration fees to its subscribers

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subscribers —more customers than all 43 banks combined—Kenya’s Acting Finance Minister, Mr. John Michuki, asked the Central Bank to audit M-PESA. He said he was not sure M-PESA would “end up well,” hinting at vulnerability to money launderers and pyramid schemes. He asked the Central Bank to study the “scheme

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the financial system at risk. The Central Bank had created some loose guidelines for mobile money transfer, but certainly no clear regulatory and legal framework. M-PESA, for example, was free to skirt onerous “know-yourcustomer” regulations, which made it much easier to sign up subscribers with marginal background checks. Cash

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agents to Mwangi’s 165 branches and 550 ATMs. But the two fast-growing institutions are symbiotic, for most Equity account holders use M-PESA, and a third of M-PESA subscribers have accounts at Equity. It was only natural that they connect, although complex because they were in many ways fighting over “ownership

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liquidity had become an issue for Safaricom. A year after the contentious audit, the biggest bank in Kenya had created a winwin arrangement with M-PESA. To reassure M-PESA agents, many of whom now depended on the MPESA agency business for their daily livelihood, Joseph laid out the facts: “We have about

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for banks to build a network than it was for Safaricom. First, they have to offer better deals than Safaricom. Second, they cannot “share” M-PESA agents, because M-PESA agencies have signed exclusivity contracts with Safaricom. Third, banks cannot create their own exclusive agents, according to the law, so any network one bank

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may earn from there on and deposits it the next morning. Once home, using his mobile phone, he transfers money from his M-PESA account to his employer’s M-PESA account. With M-PESA, he keeps his accounts straight and his earnings safe. And he stays out of jail. ******ebook converter DEMO Watermarks******* Chapter 4

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mobile phone—and incur few transaction costs. Kagure, the youngest of his three wives, reports receiving KShs. 500 ($5) per month since she subscribed to M-PESA, a big increase and a vital one, as such remittances constitute a substantial part of her household income. **** ******ebook converter DEMO Watermarks******* Send money

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the Anglican Church to help residents mobilize money. He formed a savings group called Jipange Sasa (Plan Now), noteworthy for its reliance on M-PESA as a transactional tool. M-PESA speeds up collections and bookkeeping, increases the amount saved in group funds, and has even been used to invest in the stock market

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increased transfers and lower transactions costs, along with instantaneous communications, translated into more money in the village, which of course has sparked local economies. As M-PESA remittances redistribute money from urban to rural areas, savings are more productively allocated across households, families and businesses. Instead of shopping in the market town

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and pay for it on time. This virtuous circle frees money for other agricultural inputs, and even labor. A study on the impact of M-PESA concludes that M-PESA is associated with increases in employment, but that these are almost exclusively changes in farm employment. “One possible explanation,” write authors Isaac Mbiti and

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but most of its initial success was driven by middle- and upperincome urban dwellers. They are the people putting money into the M-PESA ******ebook converter DEMO Watermarks******* system. But M-PESA’s biggest impact has been on the poor, who are more disconnected from the world’s grids than any other segment, for

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the 2000s ******ebook converter DEMO Watermarks******* in developed economies. In the U.S., Google and Microsoft engineers eventually filter into the broader ecosystem; in Kenya, M-PESA engineers are behind some of the most promising startups. Companies with names like Symbiotic, Tangazoletu, Webtribe, Zege Technologies, Mobile Commerce Ventures, MTL Systems, Coretec Systems

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first 100% mobile-powered, cashless, microfinance ******ebook converter DEMO Watermarks******* institution (MFI). All loans are disbursed to a mobile phone; all loans are repaid via M-PESA, with future plans to connect to the other mobile money providers. When clients are in arrears, they receive an SMS notification. While cashless, Musoni is

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to teachers and suppliers. Record-keeping is enhanced, although Bridge, like many other Pay Bill clients, would like to find a way to better integrate M-PESA records with its own accounting software. “Everything we do is about efficiency,” says founder Jay Kimmelman, an American educational-software entrepreneur who started the business

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Grundfos Lifelink, a global water-pump manufacturer, allows villagers to buy water with micropayments from a ******ebook converter DEMO Watermarks******* community water pump. Villagers transfer M-PESA to a smart card (“key bobs”) that can be used to draw water from specially calibrated, solarpowered water pumps. This maji ya compiuta (computer water

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monitored by local communities. In case of pump malfunction, an alarm carried by the Safaricom network sounds in Grundfos’s regional office. Water remittances through M-PESA encourage private investors to enter rural areas they previously would have bypassed. Grundfos Lifelink is looking to deploy 10 such solar pumps in different communities

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and payment system and distribution through rural retailers—that are micro-insurance firsts. THE “NEW COMMERCE” PLAYERS Hundreds of Kenyan businesses are now integrated with M-PESA and other mobile money services, according to survey conducted by the Bill & Melinda Gates Foundation. And since few of these companies have their own software

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says the World Bank’s Wolfgang ******ebook converter DEMO Watermarks******* Fengler. “Kenya shows the world innovation. That’s quite unique.” Even Budhabhatti agrees. “Luckily, because M-PESA has made Kenya popular, we are now getting some deals in European countries. I even did a presentation in Papua, New Guinea, and they said

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want to use your system.” ******ebook converter DEMO Watermarks******* Regulating cash merchants and bank agents Another burning policy issue, which pits the banks against M-PESA, is how to devise regulations for cash merchants and bank agents without giving either an unfair advantage. Tangentially related to that is a cry for

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In 2011, a year or so after issuing bank agency regulations, the Central Bank issued draft regulations covering “retail payment” agents—aka cash merchants, or M-PESA agents. This precipitated another request from banks ******ebook converter DEMO Watermarks******* to review bank-agent regulations against those of payment agents. Bank agents, for example

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to operate retail cash merchants as well as bank agents. Thus, banks can offer cash-in/cash-out merchants to compete with M-PESA, although they still cannot piggyback on M-PESA’s exclusive network. The Central Bank’s new retail-payments regulation essentially unbundles the different services that cash merchants and bank agents

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their phones to interact with the bank and to transfer money. Customers received an ATM card, upgradeable to a MasterCard debit card. Much later, after M-PESA started, MTN rolled out MTN MobileMoney in eight other African countries (Benin, Botswana, Cameroon, Cote d’Ivoire, Ghana, Rwanda, Uganda, Swaziland). Outside of South

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Watermarks******* lower commission. And since True Money is primarily a payments system, it does not face the issue of cashing out, as M-PESA does. Thus, the landscape pre-M-PESA has three major players: Smart Money in The Philippines, MTN Banking in South Africa and True Money in Thailand. All were gradations on

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an intermediary. None were “pure mobile plays” like M-PESA. The landscape post-M-PESA is not unlike the pre-M-PESA landscape, in terms of hybrid mobile money applications, except that it is extremely crowded. That includes several M-PESA clones sparked by Vodafone. M-PESA CLONES After the launch of M-PESA and its meteoric uptake, Nick Hughes’s role

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and withdrawn, with few exceptions. This is really no different than a cash transfer, except for the mode of transfer. Extensive financial diaries of M-PESA and non-M-PESA users essentially confirm this statistical finding. An in-depth study of 92 low-income (median income of roughly $2 a day) individuals in three

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the lowest margin part of the mobile money business, while electronic transactions are the highest. Mobile money analysts Kabil Kumar and Toru Mino estimate that M-PESA earns Safaricom an estimated 18% average gross margin on agent-based transactions compared with almost 100% gross margin on electronic-only transactions. And in their

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estimate, M-PESA Kenya’s “electronic-only” transactions grew 35% faster than agent transactions in 2010. That means the e-money loop is lengthening. “Growth in electronic

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$10. These relentless forces will quickly change consumer behaviour, as we have already seen with the rapid ******ebook converter DEMO Watermarks******* and widespread adoption of M-PESA. Add to the above an exogenous force of nature—the increasing youthfulness of the world’s population. Demographics, coupled with the spread of spread of

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banking advocates, this is the “nightmare scenario.” A 2009 Kenyan news report (Business Nation) hints at the potential for panic: “A technical hitch in the M-PESA money transfer service caused anxious customers to crowd at service outlets to have their accounts updated. Customers had initially been barred from accessing the premises

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in Kenya, and helped push both cash and increasingly e-money into villages, which sparks more ******ebook converter DEMO Watermarks******* commerce and jobs. And M-PESA has dramatically increased bank liquidity, by pushing money that had long been stored in the metaphorical “mattresses” into trust accounts to back the e-float

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was $1,217 and the average was $39. This suggests, interestingly, that many more customers, even local ones, are choosing to pay by M-PESA rather than cash. M-PESA, in effect, serves as Mercy’s accounting tool. It provides figures for how much fish she should buy based on the sales revenue deposited

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KickStart, which manufactures and sells foot-powered water pumps in Africa; Frederick Eijkman, co-founder and CEO of Pep Intermedius, which owns and operates numerous M-PESA agencies; Wolfgang Fengler, lead economist in the Nairobi office of the World Bank; David Ferrand, director of Financial Sector Deepening in Nairobi,; ******ebook converter

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DEMO Watermarks******* Jared Getenga, project manager, Kenya Credit Information Sharing Initiative; Nick Hughes, the “godfather” of M-PESA dating to his tenure at Vodafone, and who is now a director of SignalPoint Partners; Steve Isaboke, general manager of MultiChoice Kenya, a satellite TV

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Maina and Hellen Kabira, and from Strathmore University, led ******ebook converter DEMO Watermarks******* by John Wachira. Many thanks to Safaricom, which gave us access to M-PESA agents, partners and customers, and to the GSMA Development Fund, which provided travel and research support. The University of Nairobi gave Tonny Omwansa local logistical

Matchmakers: The New Economics of Multisided Platforms

by David S. Evans and Richard Schmalensee  · 23 May 2016  · 383pp  · 81,118 words

building or investing in multisided platforms—in the cloud or on the ground. It’s not only full of great stories like the rise of M-PESA, it’s also a practical guide to getting your platform business off the ground. If the people behind Apple Pay had this book to

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to massively reduce important market frictions, and to provide financial services to millions of impoverished people. And it is a story of how multisided platforms—M-PESA and other mobile money schemes that have started in Kenya and elsewhere—are leapfrogging traditional industries. Kenyans don’t need to rely on banks for

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out. Building a network of specialized cash-in and cash-out (CICO) agents that would cover the country, particularly its rural areas, was unattractive to M-PESA for the same reason that banks found it uneconomical to build many rural branches: volumes would be too low at many locations to cover fixed

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had to solve two chicken-and-egg puzzles. How It Works A Safaricom subscriber needs to go to a CICO agent to set up an M-PESA account. The CICO agents are typically small shops, gas stations, bank branches, or post offices that offer these services as part of their businesses

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and that can thus make a profit on relatively small volumes of M-PESA transactions.10 The agent records personal information about the subscriber, replaces the SIM card in the subscriber’s phone, and provides him a PIN for

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accessing the account. To obtain e-money for his account, the subscriber hands cash over to the agent, and the agent uses the M-PESA system to deposit e-money in his account. To send e-money, the subscriber needs to type in the mobile phone number of the recipient

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to withdraw the money in cash. She enters the agent’s number, the amount of the withdrawal, and her PIN. The agent uses the M-PESA system to reduce the balance in the recipient’s e-money account and gives her the withdrawal amount in cash. Meanwhile, the sender’s e

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-money account is debited. Both the sender and receiver get SMS receipts for these transactions. M-PESA receives and pays various fees during this process. While the company doesn’t charge the sender anything to put money into his account, it charges

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a fee to send money and another to receive it. M-PESA pays the CICO agents a commission for each new customer they sign up and for cash-in and cash-out transactions. The Start-Up Problem

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The M-PESA system sounds great, just as OpenTable and other successful multisided platforms do, with twenty-twenty hindsight. But a moment’s reflection reveals just how

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difficult it was to get this mobile money platform off the ground. Suppose a young man working in Nairobi signs up for M-PESA so he can send money to his parents. The service is worthless to him unless his parents are willing to use the service. One

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to get off the ground than single-sided firms. While some people are mainly senders and others are mainly receivers, most people probably use the M-PESA system both to send and to receive money. Thus, senders and receivers aren’t groups of different people; they are people playing different roles at

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his parents—farmers in a rural village—money for groceries, for instance, and they may occasionally send him money on special occasions. Similarly, most M-PESA agents both get and give out cash, even though some do more cash-in and others do more cash-out. The need for cash-in

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and cash-out outlets compounded the M-PESA start-up problem. Senders can’t use the platform if they can’t put cash in, and receivers won’t use the platform if

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agents. But moving cash to and from rural areas is costly, and holding it in anticipation of withdrawals has both costs and risks. Since M-PESA pays agents only for transactions, a shop needs to make sure there is enough demand from senders and receivers before it signs up to be

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reasonably close to a CICO agent where they could buy e-money and cash it in. In setting up the CICO network and expanding it, M-PESA had to balance two conflicting forces. Senders and receivers would value having more agents nearby. That argued for recruiting more agents and increasing the density

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it also ensured that the stores could receive transaction fees that were high enough to make it worthwhile for the stores to devote attention to M-PESA customers. Some Kenyans were more often senders, and others were more often receivers. To get a significant volume of transactions flowing through its system

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disproportionately located in the urban areas, and receivers were disproportionately located in the rural areas. To make sure both types of customers were on board, M-PESA made sure it had agents who could register people and provide both cash-in and cash-out services throughout the country, including the important rural

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areas. M-PESA adopted a pricing model that would encourage senders to recruit receivers. It was possible to send e-money to anyone in the country who had

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structure provided strong incentives for senders to persuade those to whom they wanted to send money to register for M-PESA. Table 11-1 summarizes M-PESA’s fees as of 2009.13 TABLE 11-1 M-PESA’s fee structure, 2009 (in KShs) Transaction type Transaction range Customer charge Minimum Maximum Deposit cash 100 35

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100 5,001 10,000 175 10,001 20,000 350 20,001 35,000 400 Withdraw cash by registered 100 2,500 25 M-PESA user at M-PESA 2,501 5,000 45 agent outlet 5,001 10,000 75 10,001 20,000 145 20,001 35,000 170 Withdraw cash

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by registered 200 2,500 30 M-PESA user at PesaPoint 2,501 5,000 60 ATM 5,001 10,000 100 10,001 20,000 175 Withdraw cash by 100 35,

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, and it had successfully recruited CICO agents across the country. It had solved the initial coordination problem. Yet that did not guarantee its success. M-PESA tried to get people to subscribe by emphasizing how the platform could solve a single major friction for them. It focused on “Send Money Home

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-winning commercial shows a young man in a suit and tie at his desk at work.14 He picks up his mobile phone and selects “M-PESA” and then “Send Money” from the menus. The commercial then shows Kenyan shillings shooting out of the phone and landing in the apron of

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on June 3, 2007. The voice-over is “You can send pesa fast and safe using Safaricom’s new service.” Several charts reveal how M-PESA did during these dangerous early months. Figure 11-1 shows the number of registered users and the value of transfers that took place over the

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registered users increased dramatically during this period and, in parallel, so did the value of transactions on the e-money platform. FIGURE 11-1 Registered M-PESA users and value of transactions in US$ By February 2010, there were 9.7 million registered users (42 percent of people over the age of

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volume. The number of agents grew from the initial 307 in March 2007 to 25,394 in February 2010. FIGURE 11-2 CICO agents and M-PESA transaction volume Figure 11-3 shows transaction volume per agent and registered users per agent. During the first few months, the agents’ economics improved,

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and went on to enjoy overwhelming success. Other mobile network operators in Kenya followed Safaricom’s lead and established mobile money systems. Mainly because of M-PESA’s great success, the people of this poor African country of only 44.9 million are more likely to use mobile money, and to conduct

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more transactions monthly, than the people of any other country in the world.19 But M-PESA’s success was far from inevitable. There’s an App for That Once people had signed on and were actively using the platform to transfer

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money, and M-PESA had its dense agent network throughout the country, it could consider other services that could use the same platform. Many were part of the original

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2015, the Commercial Bank had lent KShs 24 billion ($271 million). In early 2015, the KCB Bank Group launched a program in partnership with M-PESA. This program allowed users to access loans of between KShs 50 and KShs 1 million ($0.565–$11,300), due in one to six months

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, at interest rates between 4 percent and 12 percent. M-PESA and the other mobile money schemes replace many of the services that traditional banks would provide. People can use mobile money as they would a

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they want to buy the expensive physical point-of-sale terminals that are used in countries where most consumers use cards? As of late 2015, M-PESA consisted of four intersecting two-sided platforms: (1) a sender–receiver money-transfer platform; (2) a registered user–CICO agent platform; (3) a financial

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registered user platform. All four platforms intersect with the registered user, who relies on her phone to interact with all the other sides. Africa Rising M-PESA has shown the way for countries in the rest of Africa to bring financial services to people across the income spectrum, from the poorest rural

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11-2, have these schemes cracked the chicken-and-egg problem and obtained significant growth and penetration.22 Others are sure to follow, though, since M-PESA, as a pioneering platform, has shown a way to do it successfully and has demonstrated that successful mobile money schemes can speed up economic development

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women, back in a village can’t support themselves. They have made families less susceptible to income shocks. One study found that the use of M-PESA enabled Kenyan families to maintain consumption in the face of negative income shocks, while those who didn’t use this money transfer service saw household

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were third parties—in most countries worldwide. In most ways, except for the use of mobile phones, its business model since 1871 is similar to M-PESA’s. In short, many of the multisided platforms that are transforming industries today are turbocharged versions of matchmakers that did more or less the same

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will transform industries over decades rather than years. That’s not to say some things won’t happen quickly. Just look at the impact of M-PESA’s leapfrogging of traditional banking on Kenya. BlaBlaCar may be poised for similar growth in a number of developing countries in which poor infrastructure means

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to buy, that can harm sellers. Ignition: When a multisided platform achieves critical mass and starts a process of self-sustaining growth. For example, once M-PESA had enough people with accounts who wanted to send or receive, and enough cash-in/cash-out agents who sold e-money to senders or

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“Commercial Bank Branches (per 100,000 Adults)” http://data.worldbank.org/indicator/FB.CBK.BRCH.P5 (data for 2006). 4. Sarit Markovich and Charlotte Snyder, “M-Pesa and Mobile Money in Kenya: Pricing for Success,” no. 5-213-250 (Evanston, IL: Northwestern University, December 3, 2013). 5. No data is available for

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Connections, excluding cellular M2M: Q4 2006,” https://gsmaintelligence.com/. 10. Olga Morawczynski, “Examining the Adoption, Usage and Outcomes of Mobile Money Services: The Case of M-Pesa in Kenya,” May 2011, 61, https://www.era.lib.ed.ac.uk/bitstream/handle/1842/5558/Morawczynski2011.pdf;jsessionid=8C18972CF709DB8AA70C004302F5CFA6?sequence=2. 11. Central Bank

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of Kenya, “Mobile Payments,” https://www.centralbank.go.ke/index.php/nps-modernization/mobile-payments. 12. Ignacio Mas and Amolo Ng’weno, “Three Keys to M-Pesa’s Success: Branding, Channel Management and Pricing,” Journal of Payments Strategy and Systems 4, no. 4 (2010). Dollar figures shown in this chapter were converted

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and we show this calculation just to give the reader sense of scale. 17. After 2010, a few other mobile money platforms entered Kenya, although M-PESA still accounted for the preponderance of transactions. The data in figures 11-4–11-6 includes these other schemes. Therefore, it accurately reflects the overall

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growth in Kenya but overstates the growth of M-PESA somewhat. 18. Central Bank of Kenya, “Mobile Payments,” https://www.centralbank.go.ke/index.php/nps-modernization/mobile-payments. 19. GSMA Staff, personal communication

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with the authors, October 1, 2015. 20. Safaricom, “Lipa Na M-PESA,” http://www.safaricom.co.ke/business/m-pesa/lipa-na-m-pesa. 21. GSMA, “2014 State of the Industry: Mobile Financial Services for the Unbanked,” 2014, http://www.gsma.com/mobilefordevelopment/wp-content

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market cap of, 40 operating system, 47–48 stores, 195 apps, 47–48. Apple and, 80, 100, 113–114, 117 Facebook, 109 messaging, 201 M-PESA, 164, 167–181 open source licensing, 115–116 quality control and, 139, 142–143 retail and, 185–196 standards for, 126 Ariba, 67–68, 82

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188. See also mobile communications browsers, 42 Burberry, 194–195 cash, 203–204 cash-in and cash-out (CICO) agents, 169, 170, 171. See also M-PESA chat rooms, Alibaba, 60 Chen, Steven, 69–70. See also YouTube Chestnut Hill Mall, 95 chicken-and-egg problem. See critical mass China Alibaba, 58

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164 coordination problem and, 70–73 design in creating, 121–133 economic model for, 76–78 ecosystems and, 104 landline telephones and, 22–23 for M-PESA, 169–170 network effects and, 21–31 origins of term, 71–73 pricing and, 96–98 warning signs of failure in, 155–156 Cue,

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and, 70–73 driving traffic and, 73–76 economic model for, 76–78 failure in, 82–83 modification of strategies for, 151, 154–155 at M-PESA, 174–178 at OpenTable, 11–12 pricing and, 82 strategies for, 78–82, 151, 154–155, 159–160 warning signs of failure in, 155

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69–70, 80. See also YouTube Kohan, Shelley, 184 legal environment, 140 lemons problem, 138–139 Levchin, Max, 80–81 light bulb, 204 Lipa Na M-PESA, 179 Lohan, Lindsay, 135–138, 140 London Stock Exchange, 140–142 loss leaders, 31 Love’s Travel Stops, 86 Lundgren, Terry, 194–195 Lyft, 30

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ISPs for, 45–46 shopping changed by, 183–196 mobile payment systems African economic development and, 180–181 Apple Pay, 58, 149–150, 156–164 M-PESA, 164, 167–181 momentum, 73. See also critical mass; ignition money side of the platform, 33–34, 93–94 Monster, 50, 124 Motorola, 113,

The Wide Lens: What Successful Innovators See That Others Miss

by Ron Adner  · 1 Mar 2012  · 265pp  · 70,788 words

7 Changing the Game: Reconfiguring the Ecosystem to Work for You Main Case: Electric Cars CHAPTER 8 Sequencing Success: Winning the Connected Game Main Cases: M-PESA and Apple CHAPTER 9 Multiplying Your Odds of Success Better Place Epilogue Acknowledgments Notes Index PREFACE When I started working on innovation ecosystems over a

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construction of a second ecosystem. I will illustrate these principles using examples of success in two industries. First, we will explore the way in which M-PESA, a Kenya-based pioneer of mobile payments, followed these principles to build a financial services ecosystem that was used by 65 percent of the Kenyan

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the principle of ecosystem carryover to leverage elements and constellations from its old ecosystems to jump-start its construction of new ecosystems. M-PESA: Creating Mobile Banking Services for Unbanked Populations M-PESA is a joint venture between Vodafone and Safaricom, Kenya’s dominant mobile network operator. Piloted in 2005, and then relaunched in

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27 percent had access to one—and those numbers were rapidly increasing. (By the end of 2010, 63 percent of Kenyans were mobile phone subscribers.) M-PESA sought to deliver a basic banking function to Kenya’s huge unbanked population, facilitating commerce and entrepreneurship by increasing access to capital while reducing transaction

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costs—and to do it profitably. In 2005, M-PESA (M is for “mobile” and pesa is Swahili for “cash”) launched a pilot test of its proposition by partnering with a local microfinance institution,

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of small business borrowers who would then assume a collective responsibility to pay back the money, provided the customer base for the pilot program while M-PESA provided the technology and delivered the mobile services. The idea was to offer a comprehensive financial service that would let users transfer money person to

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person, deposit and withdraw cash through a Safaricom agent, and use M-PESA to receive and repay their micro-loans—all without the need for smartphones, 3G, or any other new technology development. The service worked in much

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divergent cultures of telecom (forward-thinking, rapidly developing) and banking (conservative, slow to change), and lived in constant fear of being shut down by regulators. M-PESA’s exact role—as a money transfer service, but also as an entity that allowed customers to maintain a noninterest-bearing account balance—was murky

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that the company was not formally regulated as a financial institution. Figure 8.1: Value blueprint of M-PESA’s 2005 pilot attempt. More problematic were the hurdles that arose as a consequence of M-PESA’s partnership with its microfinance partner. The involvement of Faulu Kenya meant that considerable complexity was added

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accommodate its particular lending models, treasurer accounts, and accounting practices. Faulu Kenya, wary about the novelty of the M-PESA proposition, chose to retain its paper-based back-office procedures instead of adopting M-PESA’s real-time data entry system. This resulted in a complex reconciliation process between the two organizations, which

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were moving at different speeds. According to Lonie: “The bottleneck in transferring the money M-PESA had collected in loan repayments to Faulu’s bank account was getting its books to a point where it could request the funds. To make

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M-PESA more suitable for [microfinance institutions], we need to create data export files that can be easily uploaded in whatever format their existing software requires.”

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The partnership between M-PESA and Faulu Kenya was a morass of interdependent processes that severely limited the success of the pilot. Reflecting on the challenges of the experiment, Lonie

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need to find a way to simplify things before launching a national service for millions of customers.” Finding the Minimum Viable Ecosystem (MVE) The M-PESA team went back to the drawing board and, in April 2007, launched a new initiative that took what had been a complex endeavor and focused

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only on its most basic elements. Rather than constructing the big picture all at once, M-PESA eliminated the key sources of coordination challenges—the banking component, which had introduced regulatory obstacles, and the micro-loan component, which had introduced the need

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anywhere in the country. Kenya was already blanketed with kiosks where Safaricom agents sold airtime to mobile customers, and these same agents would facilitate the M-PESA money transfers, doling out the appropriate amount of cash to transfer recipients. And because no bank accounts were involved, the regulatory hurdles were much lower

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. Figure 8.2: Value blueprint of M-PESA’s 2007 relaunch—the minimum viable ecosystem (MVE) of the money transfer offer. Of course, launching even just the money transfer service was not without

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its challenges. M-PESA still faced obstacles, high among which was ensuring that the rural agents maintained a sufficient cash float. Since customers tended to make deposits in the

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partnering challenges of the next stage of development. From Minimum Viable Ecosystem to Staged Expansion Having established a basic but demonstrably successful money transfer service, M-PESA began its staged expansion beyond its MVE, adding new partners to enhance the value of its core offer. It brought them on to its platform

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whom was the subject of active and ultimately unproductive debate—it brought them there on its own terms. Figure 8.3: Value blueprint of M-PESA’s 2007 relaunch showing the initial minimum viable ecosystem (MVE) and subsequent expansion stages of the offer. Within the first year

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partnership with PesaPoint, one of the largest ATM service providers in Kenya. As an alternative to the Safaricom agents, M-PESA customers could now choose the option “ATM withdrawal” from the M-PESA menu on their phone and receive an ATM authorization code for one-time use; no bank card required (expansion stage

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2). And in 2009, M-PESA, in partnership with Western Union, introduced an international remittance service to enable money transfers from the United Kingdom (expansion stage 3). By July 2009,

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two years after its initial launch, M-PESA had expanded its customer base to 7.3 million, with an agent network of over 12,000. Cumulative person-to-person transfers had amounted to

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an impressive $2.7 billion (Kenya’s GDP in 2009 was $63 billion). These strong numbers meant M-PESA was in a good position to expand its offering to add more formal banking services and insurance. This time, with proven commercial success and a

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history of reliable operation, the regulatory obstacle was much easier to cross. In the spring of 2010, M-PESA did just that. In conjunction with Safaricom, the firm teamed up with Equity Bank, Kenya’s biggest bank in terms of client base, to create

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M-Kesho (kesho is Swahili for “tomorrow”), a financial service that combines the benefits of a bank account with the convenience of M-PESA. M-PESA customers could now enjoy an interest-bearing bank account, as well as services such as micro-savings and micro-insurance, all of which could be

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in the market, nobody has put together all these services to provide this kind of convenience to the customer.” By incorporating banking and microfinance services, M-PESA finally achieved the initial vision of the 2005 pilot program. Getting the value proposition right was not enough. Turning this vision into reality required a

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a staged sequence (increasingly sophisticated money transfer). A Choice of Paths: Pilots vs. Footprints The M-PESA case offers a valuable contrast between two different approaches to building toward success. The path initially pursued by M-PESA in 2005, which was abandoned in the face of partner-induced complexity, exemplifies the traditional prototype

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clear path to getting the system together at scale, ecosystem pilots languish and never get off the ground. Underlying the failure of the initial M-PESA pilot effort was a combination of co-innovation and adoption chain challenges that were inherent in the nature of the value proposition (the need for

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an inconsistent view of the venture’s value blueprint and a disagreement about ecosystem leadership among all the partners. While there was consensus between the M-PESA and Faulu Kenya teams about the overall value proposition, there was no consensus on the specifics of how the different activities would actually come together

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scale ecosystem deployment contrasting a traditional pilot demonstration followed by a phased rollout and a minimum viable ecosystem (MVE) rollout followed by a staged expansion. M-PESA’s 2007 money-transfer-only offer had all the characteristics of a perfect minimum viable footprint. It was simple, and therefore relatively straightforward to deploy

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group of target consumers; and it was extendable, and therefore able to accommodate the addition of new elements. Having established itself in the market, M-PESA was able to use this MVE as a platform on which to sequentially mount additional elements for the expansion of the proposition. The hallmark of

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progress in one stage feeds directly into progress in the next. By sequencing the construction of an ambitious ecosystem into a series of discrete stages, M-PESA was able to plot an incremental path to radical change. Ecosystem Carryover: How to Build Success upon Success Driving staged expansion from an MVE is

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edition of The Wide Lens, this concept was referred to as “Minimum Viable Footprint.” 195 65 percent of the Kenyan population: “In Rural Kenya, M-Pesa Is Used as a Savings Account Tool,” Mobile Payment Magazine, March 3, 2011. 195 81 percent of Kenyans did not have access to a bank

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account: “Enabling Mobile Money Transfer: The Central Bank of Kenya’s Treatment of M-Pesa,” Alliance for Financial Inclusion, case study, 2010, p. 2. 195 27 percent of its citizens owned mobile phones: Ibid., p. 92. 195 63 percent

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too many challenges to mention”: Jaco Maritz, “Exclusive Interview: The Woman Behind M-PESA,” How We Made It in Africa, November 11, 2010, http://www.howwemadeitinafrica.com/exclusive-interview-the-woman-behind-m-pesa/5496/. 197 considerable complexity was added: Sarah Rotman, “M-PESA: A Very Simple and Secure Customer Proposition,” CGAP.org, November 5, 2008

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198 “we would need to find a way to simplify things”: Ibid., p. 74. 200 expanded its customer base to 7.3 million: Michael Ouma, “M-Pesa Now Ventures Abroad to Tap into Diaspora Cash,” East African, October 19, 2009, http://www.theeastafrican.co.ke/business/-/2560/673512/-/5gaimnz/-/index.xhtml. 201

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, automobile Avatar, 74 Aventis, 102–3 B Bag of Bones (King), 89 Baldwin, Don, 25 Ballmer, Steve, 212–13 Balsillie, Jim, 211 Banking, mobile. See M-PESA Barnes & Noble, Nook, 100 Barrett, Craig, 122 Battery-powered autos. See Better Place; Electric vehicles (EVs) Berelowitz, Dr. Michael, 109 Better Place, 179–90,

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construction sequence, 193–223 Apple example, 207–23 ecosystem carryover, 194, 205–7, 213–21 efficiency of, 205 minimum viable ecosystem (MVE), 194, 198–205 M-PESA example, 195–205 staged expansion, 194, 199–205 See also individual stages Ecosystem for innovation building, sequence of. See Ecosystem construction sequence development/use, history

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–9 limitations of product, 104–5, 107 pulmonary function test issue, 109–12 value blueprint, 105–8 F Facebook, 207 Fanning, Shawn, 144 Faulu Kenya, M-PESA relationship, 196–98, 203 FedEx, 206 Fellman, Dan, 71 FireWire, 145, 146 First movers. See Early movers Fithian, John, 72 Fluence Z.E., 184,

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, 52–53 Mines, Christopher, 143 Minimum viable ecosystem (MVE), 198–205 effectiveness, logic of, 199, 203–5 goals of, 194, 202–5, 221–22 M-PESA, 198–205 versus traditional approach, 201–4 M-Kesho, 201 Mobile phones, 39–46 first cell phone, 39 first generation, 38–39 iPhone success, 210

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–17 leading players, 40, 211, 214 Nokia 3G phone failure, 42–46, 52–53 payment system via. See M-PESA profits, source of, 186 3G capabilities, 40–42 2G technology, 39–40 Windows Phone OS, 52–53 Model T, 166, 184 Moore’s law,

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150 Mossberg, Walt, 207 Motorola, 39, 214 Moviemaking, digital methods. See Digital cinema MP3 players. See Portable music players M-PESA, 195–205 customer base, expansion of, 199–201 initial system problems, 196–97, 199, 203 minimum viable ecosystem (MVE), 198–205 partnerships, 196, 200–201

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Rio PMP300, 142 Rocket e-reader, 88 S SaeHan MPMan, 140–44 failure, reasons for, 142–44 features, 142 Safaricom, mobile banking joint venture. See M-PESA Samsung, 40, 207 Scaling, pilots, difficulty of, 202–3 Semiconductor lithography, 150–53 functions of, 150–51 goals of, 152 innovation ecosystem for, 151–53

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early-mover advantage, 140–41 Sortais, Thierry, 17 Spectrum rights, 41, 42 Staged expansion, 199–205 goals of, 194 iPhone, 216–17 iPod, 208–10 M-PESA, 199–205 Stringer, Sir Howard, 90 Superabrasive grinding wheels, 59–61 benefits of, 59–60 costs versus benefits problem, 60–61 Suppliers supply chain, managing

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functions of, 85, 87, 112–13 for inhalable insulin, 101–12 for iPad, 220 for iPhone, 217 for iPod, 210 map, example of, 87 for M-PESA, 197, 198, 200 necessity of, 84–85, 100, 112–14, 226–27 for Sony Reader, 91–95 as team-based effort, 113–14 updating,

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(VPF), 72–73, 76 Vision and co-innovation, 50–51 value proposition as, 85 VISTA electronic record system, 131 Vodafone, mobile banking joint venture. See M-PESA W Wachter, Dr. Robert, 119 Wal-Mart, RFID chips, 133 Weed, Larry, 120 Whitney, William C., 165–66 Wide-lens perspective components of, 7,

The Next Factory of the World: How Chinese Investment Is Reshaping Africa

by Irene Yuan Sun  · 16 Oct 2017  · 239pp  · 62,311 words

imperfect systems can produce world-class brilliance. To illustrate the point, let’s look at the clearest case of African success in innovation—mobile payments. M-Pesa is the Kenyan mobile payments platform, and it is unquestionably the most successful system of its kind in the world. Using

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M-Pesa on their cell phones, Kenyans can send one another money, pay for a wide range of goods and services, and conduct a variety of banking transactions. Because of M-Pesa, mobile payments are much more commonplace in Kenya than in America

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—in Kenya, even the smallest street vendors are likely to accept M-Pesa. In total, Kenya has 19 million M-Pesa users, who represent about 70 percent of its adult population.14

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More than 40 percent of Kenya’s GDP is transacted through M-Pesa, and the number of M-Pesa transactions in Kenya alone outnumbers the number of Western Union transactions in the whole world.15 Despite the number of powerhouse companies like Google and

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that have touted their own online payment systems, one out of every two people who send money over a mobile phone is a Kenyan using M-Pesa—an astonishing proportion when one considers that Kenya represents 0.0006 percent of the world’s population.16 How did Kenyans figure out something that

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has eluded the rest of the world? There are two prevailing narratives typically told about M-Pesa’s origins. One is the Disney version that many Kenyans would like to believe: a scrappy young Kenyan inventor noticed a need and figured out

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how to fill it through sheer ingenuity. Several lawsuits have been brought by Kenyans who claim to have invented M-Pesa, and perhaps because Kenyans would like to believe that M-Pesa was their doing, the story lives on, even if no one is certain who actually invented it. Dr. Shem Ochuodho

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somewhere between a Disney film and a depressing documentary. Sure, Vodacom had a promising idea, but it was not viable in its original form; and M-Pesa would not have taken off to become a global sensation if a variety of Kenyan actors and institutions had not pulled and pushed and reshaped

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the innovative behavior of individual Kenyan business owners, the imprint of Kenyan institutions made the difference between M-Pesa’s success and failure. When I spoke to Michael Joseph, Safaricom’s CEO at the time of M-Pesa’s rollout, he was unequivocal about how critical the Kenyan government’s role had been. Literally

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around the world had been reluctant to support mobile payment systems, and initially, it appeared that Kenya would be no exception. At the time of M-Pesa’s pilot, the Central Bank of Kenya had an acting governor who balked at making such a controversial decision. The whole bureaucracy stalled on the

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M-Pesa question, but one man was determined to make it move: Dr. Bitange Ndemo, the permanent secretary in the Ministry of Information and Communication. Because he

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the president gave his go-ahead, and the rest is history. When Dr. Ndemo told me this story, I was taken aback. This was before M-Pesa’s rollout—how could he be sure that the system was a good one? What if consumers lost money, and livelihoods were destroyed? “Innovation precedes

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,” he insisted. “We must allow ourselves to learn from our mistakes.” Along with Dr. Ndemo, others in Kenya’s bureaucracy acted with courage. Critically, during M-Pesa’s early days, the Central Bank of Kenya determined that Safaricom was not acting like a bank and decided not to subject

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M-Pesa to banking regulations. This was not laziness—the central bank in fact held a long legal review before arriving at its decision—but rather, an

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ability to report every transaction.23 When I spoke to Njuguna Ndung’u, the governor of the Central Bank of Kenya at the time of M-Pesa’s launch, he summarized his approach as basically “allowing the market to work … develop the market but make sure that you assess the risk and

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emerging vulnerabilities.”24 And crucially, Safaricom was able to use another Kenyan institution that not even the United States has: national ID cards. This allowed M-Pesa to register users and prevent money laundering with a minimum of fuss. But beyond customer safety, the Kenyan regulators declined to require the same level

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of safeguards for M-Pesa that banks have. Mukhisa Kituyi, the Kenyan who currently serves as secretary-general of the United Nations Conference on Trade and Development, says, “At the

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familiar—waiting and seeing, being willing to experiment, making up the regulations as you go along—that’s because it is. The real story of M-Pesa is not only about individual innovation, not only about firm-level innovation, but also about institutional innovation. It is the result of all those levels

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every turn. No single Kenyan could have imagined at the outset what M-Pesa would become; history shows that Vodacom’s original idea is not the one that allowed M-Pesa to take off; and Kenyan regulators certainly could not have created M-Pesa by themselves. It is the bootstrapped product of their interacting, which changed

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.worldbank.org/handle/10986/4197. 11. Ibid. 12. John Xue, interview by author by phone, February 21, 2016. 13. Ibid. 14. M-Pesa has 19 million users in Kenya. Lilian Ochieng, “M-Pesa Reports 27 pc Jump in Global Users to 25 Million,” Daily Nation, April 27, 2016, http://www.nation.co.ke/business

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/M-Pesa-reports-27-pc-jump-in-global-users-to-25-million/996-3178018-5ykpjpz/index.html. Kenya’s population in 2015 was 45.9 million, of

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://www.cia.gov/library/publications/the-world-factbook/geos/ke.html. 15. Claudia McKay and Rafe Mazer, “10 Myths About M-PESA: 2014 Update,” CGAP, October 1, 2014, http://www.cgap.org/blog/10-myths-about-m-pesa-2014-update; and Tonny K. Omwansa and Nicholas P. Sullivan, Money, Real Quick: The Story of

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M-PESA (London: Guardian Books, 2012). 16. Ibid. Kenya population of 46 million from the World Bank (2015), http://data.worldbank.org/country

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7.3 billion from the US Census Bureau, https://www.census.gov/popclock/world. 17. https://bizextras.wordpress.com/2011/05/23/so-who-invented-m-pesa/. 18. Omwansa and Sullivan, Money, Real Quick. 19. Ibid. 20. Michael Joseph, interview by author, Cambridge, MA, April 14, 2016. 21. Bitange Ndemo, interview by

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, 35, 38 Kanono, Mpho Agatha, 102–105 Katzenstein, Peter, 147–148 Kenya, 11, 109–112 demographics, 190n14 industrialization in, 8 local ownership in, 119–120 M-Pesa in, 142–146, 190n14 pharmaceutical industry, 157 railroad project in, 175–177 worker skills training in, 129–134, 148–150 Kenya Association of Manufacturers, 120

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, 153 Millennium Villages, 136 mindset, 136 Modern Times, 100–101 Mohapi, Chris, 114–115, 119 Mothabeng, Thabiso, 116–117 Mountain Textile Screening Company, 116–117 M-Pesa, 142–146, 190n14 Multi Fibre Arrangement (MFA), 63–64 Nairobi National Park, 175–177 Namibia, 3–4, 151–153 National Youth Service, Kenya, 133 Ndemo

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony

by David G. W. Birch  · 14 Apr 2020  · 247pp  · 60,543 words

, some observers were questioning whether an alternative to bank-led payment infrastructures would ever get off the ground. This perspective changed with the arrival of M-Pesa. M-Pesa M-Pesa is so important that its origins and trajectory need to be recorded and reported from many perspectives. Back in 2003, Safaricom was the market-leading

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loans in Africa more efficient, so it submitted a proposal to the UK Department for International Development (DFID) for matching funding. This was granted, and M-Pesa was born. The pilot launched in 2005, and within a year the scheme had two million subscribers and was handling $1.5 million per day

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began to use it. They started depositing cash (employing it as a kind of ‘night safe’) as well as settling transactions and paying wages via M-Pesa. Soon, hundreds of businesses were accepting it as payment. In summary, a non-bank payment system founded on new technology rather than legacy infrastructure had

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card customers. A key lesson that I took from this project was that a bank-led solution would not have triggered the innovation revolution that M-Pesa did. A key element of its success is that it was born of TELCO culture and conceived as an infrastructure on which others could build

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the twenty-first century. This year, there will be some three billion mobile money transactions in Kenya. Not all of them will be sent through M-Pesa, but almost all of them will. Let us recap. Moving from a form of digital money that is held in the accounts of financial institutions

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(solved) authentication problem and the (solved) authenticity problem. These are at the crux of the matter and provide the architectural foundation of e-cash schemes. M-Pesa was e-money that used tamper-resistant hardware to authenticate access to accounts holding the data that represents value. PayPal was e-money that used

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of these options, to central banks or to anyone else. The idea of a central bank running something like M-Pesa but for citizens is hardly far-fetched. There are tens of millions of M-Pesa users in Kenya, and Facebook can manage well over a couple of billion accounts, so I am sure

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would be able to do this), but they could use their existing systems to manage it. If we take the lessons from the success of M-Pesa and PayPal, as well as the failure of DigiCash and Mondex, on board (see chapter 1), then we have a good starting point for the

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but hard to give them terminals. It is easy to create e-coins but hard to persuade shops to take them. A decade after Mondex, M-Pesa opted to use neither cards nor terminals; instead, it used mobile phones to vault a non-bank through a regulatory gap to create something that

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transformed the lives of millions. Note that both Mondex and M-Pesa used cryptography with hardware at its core to protect the integrity of the system. In the case of Mondex, this was the now-familiar smart

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card that chip-and-PIN has propelled into every pocket. In the case of M-Pesa, this was the SIM card (which is actually the same thing) that GSMA has propelled into every phone in every pocket. Mondex was decentralized

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, M-Pesa was centralized; both were managed by a central authority, and in both cases the electronic value in the chips was issued against a 100% reserve

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ECB phrase, not mine) retail payments sector. When looking at the options for cash replacement and reflecting on experiences with population-scale schemes such as M-Pesa in Kenya, I come to the following conclusions. It seems to me that providing a good API on top of the system and allowing innovators

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global financial system to hold and transfer value, but I remain unconvinced. There are plenty of ways to hold and transfer electronic value (e.g. M-Pesa) without using bank accounts. Generally speaking, people around the world are excluded because of regulation (e.g. KYC), so if we want to do something

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book The Social Life of Money, utopias – from Plato’s Republic to Star Trek – do not usually seem to include money at all, never mind M-Pesa or Bitcoin. Anyhow, the story that interested me has a ‘guy falls asleep under hypnosis, wakes up a century later to find a model society

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no-frills nature of the accounts’ (Economist 2018). Given that a centralized system has the lowest cost, all signs seem to point towards something like M-Pesa, but a version run by the government, rather than something built using federated databases or decentralized shared ledgers. The World Economic Forum notes that one

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currency denominated and interest-bearing access to its balance sheet. The cheapest alternative to running such a system would be a fully centralized architecture like M-Pesa. To some observers, simply giving anyone and everyone an account at the central bank is the cheapest and simplest way forward. Supporters of that approach

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call it Brit-Pesa), we would not use either the smart cards of the Mondex days or the basic SIM toolkit and SMS technology of M-Pesa. We would use smartphones, chatbots, AI, fingerprints, voice recognition and all that jazz (the biometrics, blockchains and bots we discussed in chapter 2). I do

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kind of transactional system: pseudonymity is an obvious way to do this efficiently within a democratic framework. Thus, while we could envisage digital fiat as M-Pesa run by the central bank or a sort of government PayPal, there are arguments in favour of using newer and more radical meta-technology architecture

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modern age and create MacPesa: this would be a digital money system rather like Kenya’s M-Pesa (as discussed in the earlier case study), with a few crucial enhancements to take advantage of new technology. M-Pesa is an amazing success, but it is not perfect. In recent times, it has gone down

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send money. These failures cost the economy a significant amount (billions of shillings), which is not surprising when you remember that M-Pesa moves billions of Kenyan shillings every day. So, when M-Pesa drops out, it leaves customers hanging, it leaves agents losing revenue and it leaves the banks unable to transact. It

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is now a vital piece of national infrastructure, just as MacPesa would be. I have indicated that the M-Pesa system goes down from time to time; so, what if there were no system in the middle to go down anymore? What if the TELCOs

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’s lack of intermediaries and settlement. Remember, he was writing this before there was a Google or a Netscape, let alone a PayPal or an M-Pesa. In his vision, you send me an IBM dollar and I put it in my wallet. Instead of bank accounts in conventional fiat currency, companies

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it adopt some form of digital cash that can be passed directly from person to person, like Bitcoin, or some form of e-money, like M-Pesa, using hardware rather than proof of work to prevent double-spending? This is what was being tested in Uruguay, where the central bank ran a

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives)

by David Birch  · 14 Jun 2017  · 275pp  · 84,980 words

processing two billion direct credits per annum. But today? Today it could well be sent by PayM or Internet transfer, WeChat or Venmo, Facebook or M-Pesa. So how will that birthday £500 (adjusted for inflation) wend its way in 2025 to celebrate the diamond anniversary of that New Scientist prediction? Futurology

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West Country. The first lesson is that banks are very probably the wrong people to launch this kind of initiative. Our experiences with (for example) M-Pesa suggest that a lot of the things that I remember that I was baffled and confused by at the time come down to the fact

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reasons. But we are all moving to mobile, and that brings the future of money closer. The M-Pesa story No treatise on the future of money is complete without a discussion of the M-Pesa mobile money transfer scheme in Kenya. It will be a business school case study for years to come

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economist Tim Harford featured it in his 2016 BBC World Service series 50 Things That Made the Modern Economy (available at http://bbc.in/2fjzkYf). M-Pesa launched in Kenya in 2007 and subsequently spread to Tanzania and Afghanistan in 2008, South Africa in 2010, India in 2011, Romania in 2014 and

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Albania in 2015. M-Pesa is so important that its origins and trajectory need to be recorded and reported from many perspectives. In their definitive history Money, Real Quick – The

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Shorts, 2012), Tonny Omwansa and Nicholas Sullivan tell its story, which I shall précis here to make a couple of points. M-Pesa uses inexpensive feature phones to deliver financial services. The first hero of the story (in my eyes, anyway) is Nick Hughes. Nick was then Head

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Africa more efficient and he submitted a proposal to the UK Department for International Development for matching funding. This was granted back in 2003, and M-Pesa was born.******** The second hero of the story is Susie Lonie, also from Vodafone. Susie had been working on mobile commerce in the United Kingdom

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, and in 2005 she was sent to Nairobi to get the M-Pesa pilot up and running. She combined first-class project management skills with real vision, and together with Nick steered the system from a pilot that

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was done and about the issues that needed to be managed: agent incentives, float management, trading and so forth. Suffice to say that becoming an M-Pesa agent became an attractive proposition. When the system went live it was immediately apparent that the market was using it in ways that had not

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a kind of ‘night safe’) as well as settling transactions and paying wages. Now there are some 600 businesses in Kenya that accept payments through M-Pesa. These include the national airline, the power utilities and insurance companies. In summary, a non-bank payment system founded on new technology rather than legacy

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mere 1,000 bank branches, 1,500 ATMs and 100,000 credit card customers. Lessons from M-Pesa What general lessons can we draw from M-Pesa’s rise? One lesson is about the regulatory environment that allowed M-Pesa to flourish and about how, despite banks’ reservations about the scheme, once it was successful banks

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expand their borders beyond branches by hiring agents [but] only after they tried, and failed, to shut down M-Pesa’. This is why, for me, the most interesting part of the story came after M-Pesa reached five million subscribers (more than all forty-three of Kenya’s commercial banks combined) back in 2008

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. At that time the acting finance minister said he was not sure that M-Pesa would ‘end up well’. No one was sure who

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was supposed to be regulating M-Pesa, but the minister asked the central bank to study the scheme******** with the result being that the permanent

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service ‘safe and reliable’. He also said ‘there is nothing wrong with competition’. From the beginning the commercial banks had offered new services over the M-Pesa network, thereby demonstrating that mobile money could deliver financial inclusion. As the banks began to offer more services, and became part of the

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M-Pesa ecosystem as savings accounts and super agents, it seems to me that the whole financial sector was invigorated. Dynamic partnerships (such as the one with

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sector emerged. Another lesson I draw is that I simply do not believe that a bank-led solution would have triggered the innovation revolution that M-Pesa clearly did. A key element in its success is that it was born in telco culture, and conceived as an infrastructure for others to build

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specialist at the Consultative Group to Assist the Poor, which is part of the World Bank, makes a point about the ‘adjacent industries’ stimulated by M-Pesa and this seems to have led to a high-tech boom in ‘Swahili Silicon Valley’ around iHub in Nairobi. Cashless schools, pay-for-use water

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for the twenty-first century. As the CEO of Kenya Commercial Bank is quoted as saying in the book, in response to being asked if M-Pesa is a threat to banks: ‘if you don’t respond it’s a threat, but if you embrace it, then it’s an opportunity’. I

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cannot help but point to the relationship between identity and money. One of the most unexpected impacts of M-Pesa was the use of M-Pesa transaction histories as substitutes for conventional credit ratings. Remember that many M-Pesa agents are merchants, so it is natural for them to extend credit in this way. In other

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words, M-Pesa became a means for previously excluded people to demonstrate identity and reputation. And on a final semi-technical note, I can see a future in

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, though, is another story. Implications for cashlessness In Kenya there are only two payment choices for most people: cash or M-Pesa. A raft of economic activity is now floating on the M-Pesa river of money, supporting businesses that simply could not exist in a cash-only economy, so it is always interesting

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licences in this new category to a variety of fintech, tech and telecoms companies and consortia. Among the successful bidders were the mobile operators Vodafone M-Pesa and Bharti Airtel, the technology companies Fino PayTech and Tech Mahindra, as well as the Department of Posts. These payment banks can accept deposits from

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revenues, or they can find alternative sources of tax income. Since the former is a fantasy, the latter is inevitable. As is often the case, M-Pesa helps us to make these issues concrete. M-Pesa is widely used, but it clearly isn’t part of Kenyan M0 since the ultimate liability for the

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M-Pesa balances rests with the commercial banks where the float is deposited (M-Pesa has a 100 per cent reserve). The fact that it isn’t part of M0 is a potential problem, however, from the

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government’s point of view. If M-Pesa keeps growing and M0 keeps shrinking, this deprives the state of seigniorage revenue. This has indeed happened, and the Kenyan government decided to compensate with

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service providers was introduced in a 2012 Finance Act there). The predictable impact of this was that Safaricom (Kenya’s largest taxpayer) put up its M-Pesa fees by 10 per cent. So just as the unbanked trapped in a cash economy pay the stealth tax on notes and coins, so too

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feasible because of key technological advances such as mobile payments. Look again at what is going on in Africa as discussed earlier in relation to M-Pesa in Chapter 7. People who aren’t allowed to hold dollar bank accounts hold dollar-denominated mobile top-up vouchers instead. Before Ugandans had an

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effective electronic payment system they used M-Pesa from Kenya to execute local transactions in Kenyan shillings! Congolese without access to any banking network were using mobile money instead (and may never ever

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but I’d say that the combination of central register plus tamper-resistant hardware, so that low-value payments can be handled quickly (e.g. M-Pesa), is pretty good, especially if it can be extended to work offline in some environments. As discussed in chapter 9, I think that what the

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appropriately private protocol for moving value between accounts. My prediction is that this is likely to look more like the bastard child of Ripple and M-Pesa than a blockchain cryptocurrency with a one-to-one reserve in sterling. Does this kind of digital fiat currency make sense? I think it does

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nothing to do with shared ledgers, distributed ledgers or blockchains. The cheapest alternative for running such a system would clearly be a fully centralized architecture (M-Pesa in Kenya is the obvious example), but as the Bank notes this will come with increased resiliency risks that are likely to be deemed unacceptable

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in payment systems. When looking at the options for central bank digital cash and when reflecting on our experiences with population-scale schemes such as M-Pesa in Kenya, it seems to me that providing a good API on top of the system and allowing innovators to build new products and services

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, mining pools. Brit-Pesa-ledger it is Let’s summarize, then. A central bank digital currency? This is an entirely reasonable proposition. Imagine something like M-Pesa but run by the Bank of England. Everyone has an account and you can transfer money from one account to another using a mobile phone

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the Bank of England API to access the accounts or by phoning a voice recognition and authentication service. Drawing on my company’s experiences from M-Pesa, the Token Administration Platform in Nigeria and other population-scale mobile-centric systems that we have advised on, I think that this API might be

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. This is different from observing that there will be a panoply of payment mechanisms. The cash replacement technologies discussed earlier in this book – PayPal and M-Pesa, iDEAL (which dominates online payments in the Netherlands) and EMV – do not understand that sterling is a ‘real’ currency and that World of Warcraft Gold

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notes ‘in circulation’ suggest. Kenya A decade on from the then-radical step of allowing a non-bank payment scheme (discussed in detail in ‘The M-Pesa story’ in chapter 7), Kenya has more than 33 million mobile money users and 174,000 mobile agent locations. The most recent figures from the

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Central Bank of Kenya show an astonishing trend. Between February 2013 and September 2016 the number of monthly M-Pesa transactions almost tripled, going from 53 million per month to 131 million, while the number of card transactions fell from 34 million per month to

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was tripling, card use was halving. I am told by reliable sources that one of the key reasons for this – apart from the fact that M-Pesa is now accepted at some 150,000 retail outlets in a country with only around 10,000 card terminals – is that when it came time

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since they had already started to use mobile money instead of cards. An astonishing 96 per cent of Kenyan households now have at least one M-Pesa user. As a Deutsche Bank report on electronic payments noted (Mai 2014), a preference for electronic payments as an alternative to cash payments is not

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can see the effect very clearly in Kenya, where for most people there are only two payment choices: cash or M-Pesa. A raft of economic activity is now floating on the M-Pesa river of money – businesses that simply could not exist in a cash-only economy – so it is always interesting to

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example, came up with a very specific use that I’m sure we can all understand: If you go drinking, it’s better to use M-Pesa because it’s safer. Maybe you get drunk and lose your money. If you find yourself unable to dial the number, it means that it

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-calculative approach helps to explain the dynamic in the country, where mobile money is replacing cash but cards are not. Kenya, after ten years of M-Pesa development, helps us to understand the embedding of ‘financial devices’ in social structures, so that we can develop theories about how cash, payment cards and

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licences in this new category to a variety of fintech, tech and telecoms companies and consortia. Among the successful bidders were the mobile operators Vodafone M-Pesa and Bharti Airtel, the technology companies Fino PayTech and Tech Mahindra, the Department of Posts, and Vijay Shekhar Sharma, the founder of m-commerce outfit

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pioneer of accounting and financial analysis. Accounting History Review 21(3), 309–345. Omwansa, T., and N. Sullivan. 2012. Money, Real Quick: The Story of M-Pesa. London: Guardian Books. Pantaleone, W. 2014. Italy seizes 556,000 euros in fake coins minted in China. Daily Mail, 12 December. Peck, M. 2013. Ripple

Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do

by Brett King  · 26 Dec 2012  · 382pp  · 120,064 words

who don’t yet have a bank account and who currently rely heavily on cash and prepaid debit cards, but as we will see with M-Pesa and G-Cash (Chapter 6), this is hardly a hurdle for mobile cash and payments. The success of the Octopus card in Hong Kong, T

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expected to increase to one-third of consumers in 2012. Many of us would be familiar with the rapid rise of M-Pesa as the world’s leading mobile-centric financial system. M-Pesa started as a project funded by the UK Government Department for International Development (DFID) to provide a means for more

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efficient collection of microfinance loan repayments (see the case study later in this chapter). While the initial goal for M-Pesa was quite humble, no one was prepared for its incredible growth. The system addressed a long-time systemic deficiency in the Kenyan financial system that

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2012, the World Bank estimated that 25 per cent of Kenya’s Gross Domestic Product runs through M-Pesa each year—not surprising, considering that around 50 per cent of the Kenyan population is on M-Pesa, which also has a positive effect on the users’ financial lives. Only one per cent of Kenyans

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bank account. So how do you enable financial inclusion for the poorest populations in Africa? You turn their phone into a bank account. Registration for M-Pesa also increases the likelihood of users having some savings by more than 20 per cent, according to World Bank findings released in 2012. The survey

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found that 65 per cent of M-Pesa users reported having some savings compared with 31 per cent of those who were not M-Pesa users.7 Since M-Pesa’s creation, the GSM Association (GSMA) has identified 130 similar deployments across the globe, with another

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in this case mobile is both the transactional and customer acquisition channel, and often the mobile is the only way to interact with the business. M-Pesa, G-Cash, WING and MTN Mobile Money are prominent examples. Mobile Banking refers to the adding of mobile as a channel for existing bank customers

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make financial transactions or transfers across the country conveniently and at low cost. The two most successful of these are M-Pesa in Kenya and G-Cash in the Philippines (see the M-Pesa case study later in the chapter). The Edgar Dunn research also found that the number one barrier to successful deployment

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governing the deployment and usage of mobile financial services is proportionate to the risks involved. As reported in the Nairobi Star in December 2008,22 M-Pesa with all its success represented a clear threat to the Big Four banks in Kenya. The Big Four have a combined market coverage of around

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three million account holders and 750 banking outlets. M-Pesa, in comparison, has more than 15 million customers and 37,000 sales agents and outlets across the country. The massive threat that

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M-Pesa holds for the Big-Four banks is patently obvious. A similar story can be told in other markets where new payment mechanisms have been successful.

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the systems level without interfering with the customer interface. What is the outcome for banks? Well, as G-Cash from Globe in the Philippines, and M-Pesa from Safaricom in Kenya show, the biggest threat to banks is from telecom operators. So banks need to team quickly with network operators so as

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to take HTML 5. More on that in a moment when I discuss Beyond the App Store. M-Pesa Success Story Mobile remittances taking the developing world by storm Kenya’s mobile payment service, known as M-Pesa, provided by the main mobile phone company in Kenya, Safaricom, in conjunction with Vodafone, represents a

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good example of how low-cost approaches that use modern technology can effectively expand the financial services frontier. M-Pesa (M for mobile, “Pesa” for money in Swahili) is the product name of a mobile-phone-based money transfer service that was developed by Sagentia

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(now owned by IBM) for Vodafone. The concept of M-Pesa was initially to create a service that allowed microfinance borrowers to receive and repay loans conveniently using the network of mobile provider, Safaricom, and utilising

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of dealing in cash is reduced. The users of the service would gain through being able to track their finances more easily. In 2006, when M-Pesa was launched, over 70 per cent of Kenyan households did not have bank accounts, or relied on informal sources of finance. When the service was

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trialled, customers adopted the service for a variety of alternative uses, and complications arose with Faulu, the partnering microfinance institution (MFI). M-Pesa was refocused and launched with a different value proposition: sending remittances home across the country and making payments. Today, millions of Kenyans use

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M-Pesa to make payments, send remittances and store funds for short periods. Many of those without bank accounts are able to use this service, at low

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risk and cost. As noted in a recent article in the Economist,24 Kenya’s M-Pesa is the most celebrated success story of mobile banking and payments in a developing country. What started as a mobile money transfer service has become

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nation significantly. By the end of its first month, the service had just over 19,000 subscribers. Within three months, there were 268,499 registered M-Pesa customers and within the first year, one million. By 2012, that number had climbed to 15 million customers. Almost half of the Kenyan population of

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35 million have embraced M-Pesa in its short five-year history. Also impressive has been the increase in the number of monthly transactions, which increased by 4627 per cent over

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the period from July 2007 to July 2009. M-Pesa averages 11 to 14.6 person-to-person transfers each month, with over 56 billion Kenyan shillings a month (US$675m/month) moved through the

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M-Pesa network. Mobile money transfers in total crossed the 1-trillion shilling mark in 2011. With over 37,000 outlets and reseller agencies around Kenya, M-Pesa outstrips the top four banks’ reach by more than 50 to 1. This

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is why M-Pesa has become ubiquitous so quickly. M-Pesa also facilitates bill payments for more than 700 companies across Africa. M-Pesa has now expanded its field abroad. In October 2009

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, Safaricom launched its M-Pesa services in the UK through Western Union, Provident Capital Transfers, KenTV

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and others. While there are some AML restrictions on the usage of M-Pesa for transfers by a single individual, the system still allows a Kenyan working in the UK to deposit pounds or euros in the UK with

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mobile phone. With 37,000 outlets, 15 million users and close to $700m per month, the M-Pesa mobile payments network is a huge success. M-Pesa has extended its reach further across Africa with its relaunch of M-Pesa in Tanzania. While the take-up in Tanzania has been slightly slower than in Kenya, there

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million users in that country. Vodafone has also partnered Roshan to provide M-Paisa, a local variant of M-Pesa, in Afghanistan. Early in 2010, Nedbank and mobile operator Vodacom teamed up to launch M-Pesa in South Africa. Scenario 4: Apple Rules! If Apple continues on its current growth path, with the launch

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promise to make the mobile experience much more relevant to consumers, and hence place further demands on financial institutions. Keywords: Mobile Payments, Mobile Wallets, iPhone, M-Pesa, Mobile Banking, Unbanked, Remittances, Marketing, Promotion Endnotes 1 Sources: http://148apps.biz/app-store-metrics/, http://www.androidtapp.com/android-apps-statistics-summary-for-2010

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/it/page.jsp?id=1924314) 20 GSMA: gsmworld.com 21 Edgar, Dunn and Company: edgardunn.com 22 Nairobi Star, “Big Banks in Plot to Kill M-Pesa”, 23 December 2008 23 Finextra, “Philippines mobile phone-based microfinance bank set for launch”, 13 October 2009 24 The Economist, 26 September 2009 Chapter 7

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the Middle East, for remitting funds to their families back home. A similar scheme operates in Kenya called M-Pesa. It also provides for person-to-person fund transfers using mobile phones. Interestingly, with the M-Pesa scheme, it is the cash conversion which is one of its biggest issues. The shopkeeper who signs

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up as an agent for M-Pesa is required to keep a cash float which can cause problems in isolated areas, and results in the merchant having to travel to the nearest

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town to replenish the cash. M-Pesa has attempted to solve this problem through ATM cash withdrawal through PesaPoint, Equity Bank Code and Diamond Trust. More on the

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M-Pesa case study can be found in Chapter 6 on Mobile Banking. Personalisation, data and analytics ATMs could truly become automated “tellers” in the next few

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-sector payment systems. This is one of the key reasons we see fragmented success. In Kenya, for example, where regulators took a more relaxed approach, M-Pesa mobile payments quickly dominated the landscape. In South Africa, on the other hand, where the regulator insisted on cash-in and cash-out functions being

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to be an attractive customer group. This was the case in Kenya where the four Big Banks have 3.5 million customers between them, but M-Pesa, the mobile payments solution, already has 17 million customers and that’s in just six short years.23 This is the fastest “banking” of an

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—they will find themselves out of the loop on this one. Keywords: EMV, Chip and PIN, NFC, Near Field Communication, PayPal, Square, Dwolla, Bitcoin, QQ, M-Pesa, Mobile Payments, Mobile Wallet, Google Wallet, ISIS, v.me, PayPass, Amex, Visa, MasterCard Endnotes 1 Dave Birch (Consult Hyperion), “The Mobile Payment Horizon” (https://www

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Bank, “Migration and Remittances Factbook 2011” 2nd edition 23 Safaricom and thinkM-Pesa.com (http://www.thinkm-pesa.com/2012/04/every-business-should-have-m-pesa.html) 24 Mercantile Bank press release, 3 November 2009 25 “What will credit cards look like in 25, 50 or 100 years?”, Jay MacDonald, December

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mobile phone interfaces and mini-browsers. Mobile Money: Bank-like services delivered over a mobile device to enable payments between two parties; successful providers include M-Pesa, Edy, G-CASH, MTN Money, T-money, Edy, Suica. Mobile Wallet: An electronic account, dominated in a currency, held on a mobile phone that can

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Markowitz, J. “Illinois little guy takes on big stink at Goldman”. Pittsburgh Tribune-Review, 10 January 2010. Mbugua, J. “Big Banks in Plot to Kill M-Pesa”. Nairobi Star, 23 December 2008. McDonald, J. “What will credit cards look like in 25, 50 or 100 years?” (17 February, 2009) From CreditCards.com

Your Computer Is on Fire

by Thomas S. Mullaney, Benjamin Peters, Mar Hicks and Kavita Philip  · 9 Mar 2021  · 661pp  · 156,009 words

.6 Meanwhile, banking systems long reliant upon state-governed infrastructures are rapidly being displaced on the African continent by the cellphone-based money transfer system M-Pesa—the largest mobile-money business in the world.7 And bringing us full circle, many of the cellphones upon which this multibillion-dollar economy runs

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countries; here I focus on its role in South Africa, where it helped anti-apartheid activists communicate with counterparts both inside and outside the country. M-Pesa, a mobile money system first rolled out in Kenya in 2007, is already used by the majority of Kenyans; it is fast emerging as a

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of the world via email. For many African users, FidoNet was the only alternative. This “poor man’s internet” served them, however briefly, as infrastructure. M-Pesa M-Pesa is a cellphone-based mobile money system, first rolled out in Kenya in 2007 by mobile phone operator Safaricom. (“Pesa” means “money” in Swahili.) When

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clients sign up for M-Pesa, they receive a new SIM card containing the M-Pesa software. Clients “load” money onto their phones by handing over cash to one of the 160,000+ authorized

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M-Pesa agents. Friends, relatives, or employers can also load money to the client’s phone. Clients can use the money to buy airtime or to pay

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bills at hundreds of enterprises. To date, however, clients have used M-Pesa principally for “remittances,” the common practice of wage-earning workers sending money to family or friends elsewhere. M-Pesa offers a safe, secure method of storing money in an environment where many workers are migrants supporting

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family members in remote areas and robbery is common, especially when traveling. Businesses now use M-Pesa for mass payments such as payrolls—not only a major convenience but also a far more secure method than cash disbursements. The service charges small

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fees (maximum $1–3 US dollars) for sending money or collecting withdrawals from an agent. Safaricom earns more on large business transactions. M-Pesa has enjoyed enormous success in Kenya. By 2011, just four years after it was launched, over thirteen million users—representing some 70 percent of all

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percent of the country’s $55 billion GDP passed through the system.35 By the end of 2018 M-Pesa subscribers in Kenya numbered 25.5 million—half the country’s total population. While M-Pesa originally focused on domestic transfers among Kenyans, Safaricom and part-owner Vodacom (South Africa) have since expanded the

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business to seven other African countries. M-Pesa also operates in Romania and Afghanistan, as well as in India, one of the world’s largest markets for such services. Given that international remittances

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billion global business, prospects seem very bright for a low-cost, user-friendly mobile money system that can operate on even the simplest cellphones. The M-Pesa project began in 2003 with a handful of individuals at London-based Vodafone, as a response to the United Nations’ Millennium Development Goals. Supported in

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, unconnected, often semi-literate, and who faced routine challenges to their physical and financial security.”36 Since M-Pesa would have to run on any cellphone, no matter how basic, the hardware platform chosen for M-Pesa was the lowly SIM card itself. The software platform was the SIM Application Toolkit, a GSM (Global

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caused breakdowns in this process and required businesses to rework their own methods, causing them to clamor for a genuine API. A 2012 assessment of M-Pesa noted that the eventual API performed poorly, but also that a mini-industry of software developers and integrators has started to specialize in

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M-Pesa platform integration. . . . These bridge builders fall into two broad categories: 1) those that are strengthening M-Pesa’s connections with financial institutions for the delivery of financial products, and 2) those that are strengthening

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M-Pesa’s ability to interoperate with other mobile and online payment systems. The lack of a functional M-Pesa API is hindering bridge-building, but several companies have devised tools for new financial functions and online payments

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nonetheless.37 This trajectory reflects the typical platform pattern of development. Once established, the core component, namely the M-Pesa software, acquired a number of developers building complementary components. Other developers built better interfaces between the core and the complementary components, leading to

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M-Pesa-based financial services such as pension schemes, medical savings plans, and insurance offerings. This “mobile money ecosystem” is a kind of parallel universe to traditional

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banking.38 Indeed, today a Google search on M-Pesa categorizes it simply as a “bank.” Is the short-cycle temporality of platforms and second-order systems the future of infrastructure

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? M-Pesa went from drawing board to multibillion-dollar business in less than ten years. More importantly for my argument, M-Pesa rapidly acquired the status of fundamental infrastructure for the majority of Kenyan adults, serving as a

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and second-order systems—imagined, created, and provided by private-sector firms—the future of infrastructure? Will the swift takeoff of quasi-infrastructures such as M-Pesa be matched by equally swift displacement, as happened to FidoNet when internet protocols swept away its raison d’être? To me, history suggests an affirmative

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Emerging Platform: From Money Transfer System to Mobile Money Ecosystem,” Innovations 6, no. 4 (2012): 51. 35. Eric Wainaina, “42% of Kenya GDP Transacted on M-Pesa and 9 Takeaways from Safaricom Results,” Techweez: Technology News & Reviews (May 7, 2015), http://www.techweez.com/2015/05/07/ten-takeaways-safaricom-2015-results

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/. 36. Nick Hughes and Susie Lonie, “M-Pesa: Mobile Money for the ‘Unbanked,’” Innovations 2 (2007); Sibel Kusimba, Gabriel Kunyu, and Elizabeth Gross, “Social Networks of Mobile Money in Kenya,” in Money at

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). 41. Milford Bateman, Maren Duvendack, and Nicholas Loubere, “Is Fin-Tech the New Panacea for Poverty Alleviation and Local Development? Contesting Suri and Jack’s M-Pesa Findings Published in Science,” Review of African Political Economy (2019); Kusimba, Kunyu, and Gross, “Social Networks of Mobile Money in Kenya.” 42. Anne Helmond, “The

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–58, 62, 66, 122 CDC (Center for Disease Control), 20 CDU (Christian Democratic Union), 170 Cellular phones (cell), 7, 306, 317, 332, 365, 378 and M-PESA, 7, 322, 326–328, 333 Safaricom, 326–328, 333 SIM card, 326–328 Chex Quest, 237 Child pornography, 6, 117–125, 127–130 limit case

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, 111 Facebook, 330 internet, 329–330 and language, 180, 186–187, 191 typographic, 226–227 India accent bias, 188–190 Britain and, 148 caste, 299 M-Pesa, 327 Muslim women, 298 women, 162, 256, 288, 297, 306 prime minister of, 298, 330 rising superpower, 153 Scheduled Castes, 299 Scheduled Tribes, 299 Skill

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Monty Python, 233–234 Monty Python & the Quest for the Holy Grail, 234 Moore, Germaine, 117–120, 128–129 Moore’s Law, 57 Mozilla, 191 M-Pesa, 7, 322, 326–328, 333 MS-DOS, 323 Mubarak, Hosni, 84 MUC Draughts, 246 Municipal Corporation of Delhi (MCD), 300 Musical Instrument Digital Interfaces, 353

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance

by Eswar S. Prasad  · 27 Sep 2021  · 661pp  · 185,701 words

provides a gateway through which more innovative financial products can reach large populations in relatively poor countries. M-PESA In 2007, Kenya’s largest mobile phone operator, Safaricom, introduced a simple but revolutionary concept. M-PESA is a mobile banking service that enables users to store and transfer money through their mobile phones. M

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2017 less than a fifth of the population had access to the internet, while about 85 percent had mobile phone subscriptions. Unlike traditional bank accounts, M-PESA accounts can be opened without the minimum deposits that are sometimes beyond the financial capacity of poor households that lead a hand-to-mouth existence

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. Users of a Safaricom SIM card who want to register for M-PESA have to do so with a valid government ID such as the Kenyan national identification card or a passport. This helps to combat fraud and

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that each transaction is marked with the identification of the transacting parties. Users with no bank accounts can access the numerous M-PESA outlets distributed across the country. Cash collected from M-PESA is deposited in accounts held by Safaricom, which serve as checking accounts and are insured for up to one hundred thousand

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Kenyan shillings (about $925 in May 2021) by the government’s Deposit Protection Fund. To complete a transaction using M-PESA, the two parties must exchange their phone numbers, which serve as account numbers. After settlement, both parties receive an immediate SMS notification with their names

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of funds deposited or withdrawn from the user’s account. The mobile receipts help promote transparency and build confidence in the system. The adoption of M-PESA has meant that shopkeepers, farmers, cab drivers, and their customers no longer need to carry around or transact in cash. This has reduced vulnerability to

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endure long lines and hours-long waits to pay their electricity and water bills, can now make these payments easily and at their convenience using M-PESA. In a country with fewer than three thousand ATMs for a population of about fifty million, this innovation has proved crucial to providing financial products

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by other payment systems such as credit cards. In 2016, it was estimated that in 96 percent of Kenyan households at least one individual used M-PESA, and the financial inclusion ratio (the share of the population with access to the formal financial system) rose from 27 percent in 2006 to 83

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percent in 2019. M-PESA has, in effect, provided a template for the adoption of mobile money in other developing countries where a large percentage of the population has little

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or no access to traditional banking. For all its virtues and the enormous difference it has made to Kenyan households and businesses, M-PESA is not a magic bullet that can by itself dramatically improve financial outcomes for Kenyan families. Kenya’s central bank governor Patrick Njoroge has pointed

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out that simply maintaining a digital bank account is not in itself sufficient to give households access to the full range of financial services. M-PESA provides a pathway to basic banking services, but access to credit remains limited. Njoroge noted that “many Kenyans have formal accounts in various forms, but

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transactions and access simple financial products using personal handheld devices. Second, payment has become a form of identity. The phone number connected to a specific M-PESA account, for example, uniquely identifies an individual for the purpose of conducting a broad range of financial transactions. Third, mobile money provides a channel for

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the easy transfer of social payments to households as well as household payments for government services with less exposure to corruption. M-PESA kiosk in Nairobi, Kenya Mobile money has also provided a route for cross-border remittances and payments for commercial transactions. This is typically a costly

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is laudable, there are other ways to promote financial inclusion, including through private sector initiatives. As we saw in Chapter 3, mobile money such as M-PESA has had great success. Given the latent demand for financial services, it is therefore worth considering what factors, including government regulations and technological barriers, might

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Kenya, see https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups. M-PESA For more information on M-PESA, see https://www.safaricom.co.ke/personal/m-pesa and https://www.vodafone.com/what-we-do/services/m-pesa. The World Bank estimates that 17.8 percent of Kenya’s population had internet access

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Jack (2016) for an analysis of the effects of mobile money on poverty. This is also the source for the figure on the usage of M-PESA among Kenyan households. The Bottom Line on Mobile Money One example of mobile money allegedly fueling illicit activities comes from Zimbabwe. In May 2020, the

Digital Bank: Strategies for Launching or Becoming a Digital Bank

by Chris Skinner  · 27 Aug 2013  · 329pp  · 95,309 words

Bank Digital Banks are still Banks Case Studies BANCO SABADELL, SPAIN BARCLAYS BANK, UK BITCOIN, GLOBAL FIDOR BANK, GERMANY FIRST DIRECT, UK METRO BANK, UK M-PESA, KENYA SWIFT, GLOBAL THE CURRENCY CLOUD, GLOBAL About Chris Skinner Introduction I’ve called this book Digital Bank. I wanted to call it Data Wars

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infrastructure that was non-existent just a few years ago. It is the reason why Africa has seen the most rapid transformation through mobile, with M-PESA n Kenya cited as the most revolutionary change. This means that communities that only had physical connectivity now have digital connectivity. Communities have exploded from

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both traceable and immediate, with no challenge of distance, and the best example of such change is seen in M-PESA in Kenya, although this is not a typical implementation of mobile payments. M-PESA – ‘M’ is for mobile and ‘PESA’ means money in Swahili – was launched in September 2007 when the Kenyan government

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. At that time, most payments from towns to villages were made through physical transport of notes and bills using bus and taxi drivers. Under the M-PESA system, agents manage the transfers with mobile text messaging, allowing simple and immediate real-time transfer. The result is that

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become the most trusted form of payment in Kenya and the mobile operator, Safaricom, is now the largest financial operator in the country. By 2010, M-PESA had attracted 9.5 million customers increasing to 17 million by 2013, of which over 10 million make at least one transaction per month. Add

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$37.23 billion in 2012, and so you can see how significant a proportion of the economy is now dependent upon mobile money. In addition, M-PESA converted many unbanked into banked users, with around 2.5 million bank customers in Kenya when the system launched in 2007 increasing to over ten

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second wave – P2P mobile payments. This is now a hot space with many different flavours including: Mobile remittances changing the game rapidly, with Kenya’s M-PESA copied into multiple geographies. Jack Dorsey, the cofounder of Twitter, launched Square which launched in 2009 and has similarly been copied into multiple geographies. Google

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within the bank realm, there are some signs of change in this new world, particularly where people are connected 1:1 via the mobile internet. M-PESA is an example of a near-bank system that transacts 20% of Kenya’s GDP outside the banking system. The discussion of their success is

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covered later in this journal in my interview with John Maynard, but the key comment he makes is that since M-PESA launched in 2007, the number of people who now have bank accounts with the traditional banks has almost quadrupled. The reason? As mobile money provides

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fuelled by the flames of the banking systems failure to keep up with changes in demand and service. A world of change The examples of M-PESA and Zopa are purely more mature versions of another example of potentially major change: Bitcoins. Bitcoins were discussed in the last Finacle Connect – see the

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plan for 2020 is to have 200 branches, 5000 team members, 1 million customers and £20 billion of assets. M-PESA, KENYA An interview with John Maynard, Senior Business Development Manager for M-PESA at Vodafone Group Mobile payments have taken off massively over the past few years, with the most notable success being

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M-PESA in Kenya. Launched in March 2007, with an expected one million customers after year one, the system far exceeded expectations and now has over 17

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accounts. That represents nearly one account for every adult in Kenya, but the system has not been as successful overseas. What is it that constituted M-PESA’s success in Kenya and where does it go next? Perhaps you can give us a little background to start with as to why

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M-PESA has been so successful in Kenya and why did Vodafone get into this space? The product originally came into existence as a result of a

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with the customers who tried it out and from there the the decision was made that it would be the primary focus of the product. M-Pesa was launched in March 2007 and, by the end of the first year we had 2.5 million customers, far beyond original expectations. I heard

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that it is a charitable system[37]? It is a profitable venture, not a charitable system. Around 17% of Safaricom’s total revenues come from M-PESA, which is bigger than SMS and data combined. We make money from the network but so do our agents in the network. We have 40

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Kenya. We launched at the right time and the availability of the product during the turmoil following the elections of 2007-2008 helped Kenyans out – M-Pesa was the safest way to send cash or buy airtime. I don’t think we’ll see that success repeated so quickly elsewhere. Having said

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that, we’ve got 32 million customers registered worldwide (M-Pesa is live in 7 markets), and B if you look Tanzania, it shows an example of a market that has taken longer to get there

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reached critical mass, transaction volumes have gone through the roof, particularly in the last twelve months. Does that mean the Vodafone plan is to offer M-PESA services to all Africa and other emerging markets over time? We will launch in the markets where we think it’s a good fit and

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and Globe telecom in the Philippines offering mobile money products for nearly a decade, and there have been other schemes in Korea for example, but M-Pesa really re-energised interest in mobile money systems. What we were able to show with the success in Kenya is that it was possible to

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is to increase their customer base, that’s a good indication that the introduction of a payment system like M-PESA can bring wider benefits across the economy. Does that mean the M-PESA style service will always be a pure mobile payments service, or do you think it might upscale into full banking

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a future I can’t wait for. About John Maynard John Maynard is part of the commercial and strategy team working on M-Pesa - Vodafone’s mobile money transfer product. M-Pesa is has over 32 million customers, who can deposit or withdraw money from an account linked to their mobile phone at any

…

of 60,000 Agents. The service is live in 7 markets, including India, Afghanistan and Fiji. Prior to joining the M-Pesa team, Mr Maynard was product manager for a number of Vodafone products, including premium rate SMS, adult content bar, and consumer email solutions. SWIFT, GLOBAL

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to over 16.71 million subscribers. [37] Safaricom is not allowed to earn interest on the money stored, but gives interest earnings to a charitable M-PESA foundation

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