Mobile Transaction

Kenyans were once classified as the ‘unbanked’, but in what might seem a rather unlikely turn of events, they have become a leader in mobile money. In the first 10 months of 2015, the Central Bank of Kenya reported that Kenyans transacted $23 billion dollars in mobile money. In fact, Kenya holds the global record for the volume of mobile money use.


Mobile money and the supporting financial software has transformed the way of life for many Kenyans. Retailers no longer have the risk of a lot of cash on the premises, and the tedium of queuing to bank the surplus cash every day. Those who work in the cities to support their families in rural areas no longer have to make long trips to deliver money or entrust it to carriers who all too often steal a portion. It has also reportedly reduced the size of the black economy as cash makes its way into traceable circulation. It has allowed the Central Bank of Kenya to have a far more realistic view of GDP that is important when managing macroeconomic affairs.

Mobile Transaction

The big question is, why has mobile money been so successful in Kenya? Three key areas arguably drove the huge growth:


  • Kenya’s regulators created an environment where mobile money could flourish. They prioritised innovation and the regulations supported that goal.


  • Safaricom is an incredibly important part of the story and are a leading communications company in Kenya who formed a partnership with Vodafone who wanted to target the ‘unbanked’. They already had a strong presence in Kenya when they developed M-PESA which is a mobile phone-based money transfer and financing application. M-PESA stands for Mobile Money (PESA is the Swahili word for money). The Safaricom management team appreciated that the success of their solution, M-PESA, was dependent on winning over the people, not just the strength of the technology. They charged low service fees and the service was unprofitable for the first couple of years. The volume of uptake has now paid dividends and resulted in a profitable revenue stream for Safaricom. The network of 300 agents initially grew to more than 85,000. Head of Merchant Services, John Muchuri, said: “With M-Pesa you don’t need cash, you don’t need a safe, and you don’t need to worry about fake money.”


  • It is a service that has been needed for a long time. Banking is not a commercially viable option for most Kenyans given their low average wages. However, they do still require a mechanism to make payments safely and securely, and to trade. Given the high proportion of Kenyans who own a mobile phone, this seemed like the ideal solution.


  • It is incredibly easy to use. The user deposits money into an account that is stored on their mobile phone. From this account, they can send money using pin-secured text messages. Customers use the large network of agents who are typically retailers and airtime resellers to both deposit and withdraw money. In that sense, the agents are pseudo banking agents.


Mobile money is a great example of how a developing country embraced technology to aid in expanding their country. M-PESA has now launched in India, Romania, Afghanistan, and Egypt. It will be interesting to see if the impact on those countries in any way compares to the case of Kenya.