M-PESA, the World’s first mobile money transfer system and Africa’s largest Fintech, stands at the forefront of the mobile payment revolution. With a user base of over 30 million monthly active customers, M-PESA, operated by Safaricom, has become a catalyst for financial inclusion, transforming the financial services landscape in Kenya and beyond.
The mobile money transfer service was launched in 2007 as a simple money transfer service allowing people to send money from one mobile device to another. However, it has become one of Kenya’s most preferred modes of cashless payments and money transfers.
Through the power of mobile phones, M-PESA empowers individuals to transact, save, and borrow money with unparalleled ease and convenience. By embracing this innovative platform, more than 84% of Kenya’s adult population now enjoys access to financial services, a remarkable feat considering the initial figure was a mere 25%.
The success of M-PESA is not limited to its social impact but is also reflected in its impressive financial performance. As of FY22, M-PESA has generated a staggering revenue of KES 107.6 billion (equivalent to $920 million). This remarkable achievement underscores the platform’s immense popularity and its pivotal role in Safaricom’s business ecosystem.
Safaricom can make MPESA the future of the money movement. Here’s why:
Structure: By enabling seamless and secure mobile transactions, the platform has provided individuals, regardless of their location or socioeconomic background, with the means to participate in the formal economy. This financial inclusion can be implemented in other countries as it has had far-reaching impacts, empowering individuals to pursue entrepreneurial endeavors, access credit facilities, and improve their overall financial well-being.
Innovation: Beyond its financial achievements, M-PESA has paved the way for future innovations in the fintech landscape, a key factor in successful global acceptance. Recognizing mobile money’s potential, Safaricom continues exploring new technologies to expand M-PESA’s offerings. The platform has evolved into a comprehensive financial ecosystem, integrated with services such as loans, insurance, and investments, setting the pace for competitors. This is evident in MPESA services such as overdraft service Fuliza and savings and loan services Mshwari and KCB MPESA, among others.
Partnerships, Integration & Interoperability: MPESA is one of Kenya’s most accepted means of payment for both small and large businesses. The service has made it easy for businesses to incorporate it into payment options through B2B services such as the Daraja API, and Lipa Na Pesa. Furthermore, their strategic partnerships with other businesses, such as fashion retailer Shop Zetu, insurance AAR and government parastatal HELB through the MPESA mini-Apps, demonstrate Safaricom’s ability to identify, pursue and integrate with symbiotic partnerships. Their ability to partner with other entities can gain them acceptance in new territories.
Easy and Affordable to Set up: MPESA is easy to set up for both businesses and individuals. As long one has a phone with a Safaricom sim card, they can use MPESA services. Unlike banks that will require hefty paperwork and long setup procedures/costs in some instances, MPESA has made itself accessible for both personal and commercial endeavors. Moreover, the MPESA transacting costs are much cheaper compared to banks.
Security: Safaricom continues to invest in cutting-edge technology on MPESA’s cybersecurity. This is through features such as PIN authentication, SMS confirmation, SIM swap protection, and fraud detection and prevention. MPESA also provides users with access to transaction statements for referral. This can convince new customers to use the platform and thus earn MPESA more global clients.
While Safaricom seems to be on the right track as far as MPESA is concerned, the following are just some of the derailers of its quest to global dominance:
Fraud: Simswap Fraud is one of the most popular crimes committed through MPESA. Also known as SIM card swapping or SIM card replacement fraud, is a form of cybercrime and identity theft where a fraudster gains control of an individual’s mobile phone number by deceiving the mobile network operator (MNO) into transferring the victim’s phone number to a SIM card under their control. This is typically done by posing as the legitimate phone number owner and providing personal information to convince the MNO to make the swap.
SIM swap attacks typically exploit vulnerabilities in Safaricom’s identity verification processes. Fraudsters use various social engineering techniques to convince customer service representatives to perform the SIM swap, such as providing stolen personal information, impersonating the victim, or fabricating a story to deceive the representative.
Despite Safaricom’s efforts to improve MPESA’s security features, they can still not keep up with the ever-dynamic tactics used by fraudsters to steal money from unsuspecting MPESA users. Last year, Abdi Zeila, a businessman, took legal action against Safaricom and the Communications Authority of Kenya (CA), accusing them of fraud. In a class action lawsuit, Zeila stated that SIM-swap fraud in Safaricom has seen scammers drain millions of shillings from mobile phone subscribers’ bank accounts. Zeila further called on other victims to join forces and hold Safaricom accountable for alleged negligence and the financial losses incurred. MPESA’s security features need more layers to protect customers
Costs: The convenience of MPESA remains unmatched. Even though their costs are relatively cheaper than banks, sending money via MPESA is quite higher than competitors such as Airtel Money and Tkash. With the current soaring cost of living, Safaricom may need to evaluate its charges to keep up with the highly competitive Telco sector.
Data Security: Many have argued that the data stored by MPESA agents can be used to defraud MPESA customers. This is because they are stored in manual copies, which could easily get stolen or misplaced. Safaricom could explore other secure means of collecting the transaction data through STK prompts to ensure that the data remains in their systems and not on unsupervised paperwork.
Infrastructure: To transact through MPESA, one must have a Safaricom Sim card. While this type of infrastructure works well in Kenya, the global market will require an all-inclusive solution that can operate with or without a Safaricom sim card. Safaricom might need to explore other ways of facilitating transactions to conquer other markets.
Undoubtedly, M-PESA remains committed to driving innovation, expanding its reach, and enhancing the user experience. Their recent successful introduction in Ethiopia makes MPESA a fintech invention to watch out for. With its immense user base, impressive revenue figures, and the continuous drive for innovation, M-PESA stands as a shining example of the transformative potential of mobile money. But just like any other fintech, Safaricom needs to constantly improve the MPESA service to keep up with the demands of the ever-changing fintech landscape.