Mobile Banking

From, M-PESA: Mobile Money for the “Unbanked” Turning Cellphones into 24-Hour Tellers in Kenya, by Nick Hughes and Susie Lonie in Innovations Journal (PDF):

In March 2007, Kenya’s largest mobile network operator, Safaricom (part of the Vodafone Group) launched M-PESA, an innovative payment service for the unbanked. “Pesa” is the Swahili word for cash; the “M” is for mobile. Within the first month Safaricom had registered over 20,000 M-PESA customers, well ahead of the targeted business plan. This rapid take-up is a clear sign that M-PESA fills a gap in the market. The product concept is very simple: an M-PESA customer can use his or her mobile phone to move money quickly, securely, and across great distances, directly to another mobile phone user. The customer does not need to have a bank account, but registers with Safaricom for an M-PESA account. Customers turn cash into e-money at Safaricom dealers, and then follow simple instructions on their phones to make payments through their M-PESA accounts; the system provides money transfers as banks do in the developed world. The account is very secure, PIN-protected, and supported with a 24/7 service provided by Safaricom and Vodafone Group.

Uptake has been dramatic and the program has widely been judged a success. Olga Morawczynski, a doctoral candidate at the University of Edinburgh has been interviewing businesses that offer M-PESA services and has been tracking consumer adoption. According to one business owner: “Since we have become M-PESA agents we have no time to rest. This thing has even over-run our other business.” From a fascinating article at CGAP.

By contrast, mobile banking in the US has been slower to catch on due to security fears. From Mobile Content Today:

A new report by Javelin Strategy and Research indicates that, while popular overseas, less than 10% of US consumers use a mobile banking product, most over fears of a lack of security. The report entitle "2008 Mobile Banking Security Standards" found that 47% of those who did not sign up for a mobile banking product stated it was because of concerns of security, while 73% feared that hackers could access their mobile phones.

If you want to learn more about M-PESA, also see, "From Microfinance to m-Finance Innovations Case Discussion: M-PESA," by Mudit Kapoor, Jonathan Morduch, and Shamika Ravi (PDF)