Jake Kendall, Bill Maurer, Phillip Machoka,
and Clara Veniard
An Emerging Platform:
From Money Transfer System to
Mobile Money Ecosystem
In the past, the emergence of new network infrastructures (canals, railroads, elektr-
tricity, telecommunications, the Internet, usw.) has had a profound effect on the
world economy.1 New ways of moving people and goods, Energie, and information
often led to waves of innovation, and over the centuries these innovations have
transformed markets as existing firms restructure and new firms emerge to cap-
ture new opportunities. Mobile money, while often described as a money-transfer
product, is in fact a network infrastructure for storing and moving money that
facilitates the exchange of cash and electronic value between various actors,
including clients, businesses, the government, and financial service providers.
As with many other types of network infrastructure, mobile money displays
the characteristics of a platform, as it brings together financial service providers
and clients and provides them with a core functionality they can use to transact,
and which can be incorporated into various financial products.2 Platforms such as
the Internet, Facebook, iPods, smart phones, video games, and financial and com-
mercial exchanges also have great power to stimulate innovation and change exist-
ing business models. As a network infrastructure and a platform for financial serv-
ices innovation, mobile money appears to have the potential to radically reconfig-
ure how retail finance is handled in developing countries.
There are a number of fundamental challenges to reaching the poor with
financial services that have blocked market growth in the past. Perhaps the key
Jake Kendall is Program Officer with the Bill & Melinda Gates Foundation.
Bill Maurer is Professor of Anthropology and Law at the University of California,
Irvine, and Director of the Institute for Money Technology and Financial Inclusion.
Phillip Machoka is a Lecturer in Information Systems and Technology at the United
States International University, Nairobi.
Clara Veniard is Associate Program Officer at the Gates Foundation.
The views expressed herein should be considered the personal views of the authors
alone and may not reflect the views of the Gates Foundation.
© 2012 Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
Innovationen / Volumen 6, number 4
49
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
Mobile Money Players in Kenya
Mobile operators in Kenya have launched mobile money services similar to
Safaricom’s M-PESA during the past two years, including Yu (YuCash), Orange
(Orange Money), and Zain (Zap). Jedoch, M-PESA remains the most widely
used mobile money service and is the focus of our study.
challenge is that the vast majority of the poor lives in a cash economy and is paid
in cash. In developed economies, banks usually receive clients’ salaries via direct
deposit, and the money can either be moved to longer term savings products or be
withdrawn and spent through channels like ATMs and point-of-sale devices. In
developing economies, the poor lose the natural connection to the financial system
that stems from having income born in electronic form. They require a deposit-
taking infrastructure to even get their money into the bank in the first place, Und
to make matters worse, the poor often earn money unpredictably and need to
deposit whenever small windfalls come their way. In der Zwischenzeit, banks and other
financial service providers are loath to deploy deposit-taking banking infrastruc-
tur (d.h., branches and two-way ATMs) as intensively as they might require to
service poor clients’ greater deposit needs, since the revenue these clients generate
does not justify the investment. Tatsächlich, even clients who do not require intensive
deposit services (z.B., those who might receive direct government transfers or mil-
itary pensions) are rarely seen as profitable customers by banks, given the low bal-
ances they hold and the high transaction costs of traditional banking infrastruc-
tur.
Mobile money appears to have the potential to solve many of these issues. Von
giving banks and other financial service providers a cheap way to outsource cash
handling and deposit and withdrawal transactions, mobile money can enable
providers to serve clients at a lower cost per transaction and with a reduced invest-
ment in physical infrastructure. Darüber hinaus, by unbundling and outsourcing trans-
action handling, banks may be able to get more value out of their existing branch-
es and branch staff. They can refocus them on more value-adding and complex
tasks, such as wealth and risk management advisory services and cross-selling
Produkte. Mobile money also helps clients by giving them a dense network of
transaction outlets where they work and live, reducing the cost to clients of access-
ing financial services. Once clients are in the financial system and able to transact
at low cost with banks and other financial service providers, the platform enables
the provider to offer a new set of services and delivery models that were not previ-
ously possible or profitable.
The excitement over mobile money in the financial inclusion field is driven by
the possibility of providers offering savings, Kredit, insurance, and other products
to the poor at low cost. But whether mobile money will achieve this lofty vision
depends on a number of factors. First and foremost is that networks and platforms
usually require scale to have a significant impact. Zweite, even if mobile money
50
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
reaches the poor, other barriers might inhibit innovation in financial services for
this population segment. Endlich, mobile money may simply not lower clients’ and
providers’ costs enough to be truly transformative.
In Kenya, Safaricom’s M-PESA has managed to overcome the “last mile” prob-
lem
the difficulty of delivering a service over the very last leg of its journey to a
remote client by creating a network that connects over 70 percent of Kenyan
households to the financial system (13.3 million people, etwa 60 Prozent
of all adults in Kenya).3 The M-PESA network handles more transactions in a year
than Western Union does globally, and the value of transactions represents more
als 15 percent of Kenya’s GDP.
Unlike other deployments around the world that are struggling to achieve
scale, penetration is no longer the barrier limiting the benefits of this platform.
Trotzdem, having only been launched in 2007, M-PESA is still in its early stages
Und, while the uptake of M-PESA has been spectacular, it is not yet clear what the
final effect will be on the wider retail market or on the number of poor people who
access the financial system. Some in the financial inclusion field suggest there is an
“innovation gap” and that M-PESA is failing to live up to its original promise, Aber
it is too early to tell whether innovation is simply not there or is still gaining
momentum as the market comes to grips with a new way of doing business.4 It is
also too early to tell who will drive innovation—will it be M-PESA, or new and
existing players riding on the M-PESA wave? If others build products and plat-
forms on top of the M-PESA platform, the possibilities for innovation will expand
greatly.
In diesem Papier, we present the results of some initial probes into understanding
how market players are harnessing M-PESA as a platform for new services, und zu
gauge the emerging ecosystem of these services enabled by M-PESA.
We looked for existing financial institutions that are integrating M-PESA into
their service offerings, and for startups and new ventures that are launching new
“pure-play”services, das ist, services that operate primarily through the M-PESA
platform (analogous to pure-play e-commerce services that operate exclusively
through the Internet). In addition to a basic survey to provide a landscape of this
space and to measure the level of activity in the space, we sought to understand
some of the motivations for using mobile money within a new wave of financial
services and some of the challenges these new and existing financial service
providers face in doing so. We conducted the survey through Internet research and
phone calls, and then had a mini-conference in Nairobi on January 14, 2011, bei
which we brought together some financial service providers and information tech-
nology service firms that have begun to specialize in M-PESA product integration.
We also incorporate results from a recent study conducted by Microsave for
the Bill & Melinda Gates Foundation, which assesses new mobile money-enabled
products and services using information available from desk research, Interviews
with the implementers and users, secret shoppers, and focus groups.
Our investigations document the significant integration of mobile money into
the products and services offered by existing financial institutions in Kenya. Wir
Innovationen / Volumen 6, number 4
51
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
Application Programming Interfaces for Mobile Applications
Application Programming Interfaces (APIs) are sets of instructions that allow
different software applications to interface with one another. Well-designed APIs
are powerful because they allow the development of new applications that seam-
lessly incorporate the functionality of the original system into their workings.
APIs are a recent innovation: their origin is in TCP/IP network architecture, Aber
their use for user-oriented application development dates to the mid-1990s. Der
invention of M-PESA corresponds in time to the explosion of interest in APIs for
third-party application development, itself propelled by the mobile revolution,
so it can hardly be blamed for having a poor API (PayPal, Zum Beispiel, launched
APIs in 2010).
find that numerous technology firms have sprung up to facilitate this integration
between financial service providers’ back-end systems and new mobile money
platforms. We also find a number of innovative new businesses and pure-play
startups that offer financial services that operate solely via mobile money.
Institutions integrating with existing products and those launching new ones both
frequently cite improved outreach and lower costs, especially with poor clients, als
motivations for adopting the mobile money platform. That said, significant barri-
ers remain that block the development of a fully integrated ecosystem, einschließlich
the high price of person-to-person transfers and the difficulty of integrating with
the M-PESA application programming interfaces (APIs; see text box 2). From our
conversations with providers, we also infer that those wishing to outsource their
day-to-day cash transactions with clients may face a new challenge, as they must
find new opportunities for interactions with their clients to create rapport, build
trust, educate, and cross-sell new products.
MARKET ACTIVITY IN BROAD STROKES
Even though we were not able to conduct a complete census of the market, unser
search identified over 300 formal businesses that are integrated with M-PESA and
other mobile money services. All of these businesses are large enough and formal
enough to have a web presence. We did not seek to assess whether smaller or infor-
mal businesses are using M-PESA, although many also appear to be doing so.
Außerdem, we found almost 90 formal financial institutions that have integrat-
ed their operations with mobile money (primarily M-PESA) and few providers
that do not have mobile money integrations completed or under way. Financial
service providers range from traditional banks, savings and credit cooperatives
(SACCOs), and insurance providers to newer mobile-based credit, insurance, Und
mobile savings offerings.
Many of these integration efforts and products are still in an early stage, Und
some of the new products have few active customers. More detail on the market
activity we found follows.
52
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
LANDSCAPE OF “INNOVATORS,” “INTEGRATORS,”
AND “BRIDGE-BUILDERS”
For the purposes of our study, we developed a shorthand. We call financial service
providers “integrators” when they add mobile money as a service delivery channel
for an existing line of products, and “innovators” when they offer new entrepre-
neurial products or ventures launched around a purely mobile money-based busi-
ness model. We call application developers that specialize in mobile money inte-
grations for financial and payment services “bridge-builders.”
Integrators
Most financial service providers in Kenya are joining mobile money platforms as a
channel through which their clients can make deposits and withdrawals from bank
accounts and other financial products. Financial service providers integrate with
mobile money platforms using a variety of mechanisms that vary according to the
institution. These linkages are often difficult and expensive to create, and many
providers we spoke to are wrestling with the process. In our analysis below we
focus on M-PESA, since it is by far the dominant platform, although other mobile
money providers exist.
No official API exists that service providers can use to integrate with M-PESA.
With the exception of the M-KESHO product described below, financial service
providers typically adapt two different one-way mechanisms to move money to
and from clients. M-PESA’s Pay Bill function allows clients to send deposits from
their M-PESA account to the financial service provider, whereas most providers
use custom built “screenscraping” programs that connect to M-PESA’s bulk pay-
ments web page to automate the sending of large numbers of withdrawals. Der
screenscraping programs capture data from terminal display screens. Banks can
avoid the bulk pay screenscraping by using a SIM card, which is activated directly
by the bank’s server. Jedoch, these integrated SIM cards are extremely slow and
not suitable for sending more than a few dozen transfers per minute, so they are
rarely used. In some cases, financial service providers opt to use a third-party
“middleware” software application to facilitate integration with M-PESA, although
these also use the bulk payments channels to activate payments.
Most providers offer clients two separate interfaces for making deposits and
withdrawals. Deposits are done through the normal Bill Pay option in the M-PESA
menu on their phone. Clients must then use a USSD-based interface (described
below) that allows them to trigger withdrawals to their M-PESA account. Here we
describe how some of the integrations work.
M-KESHO link with M-PESA. Equity Bank, with over six million bank
accounts that constitute 55 percent of all accounts in Kenya, is perhaps the most
active in the mobile money space and has the strongest link with M-PESA. In May
2010, Equity partnered with Safaricom to launch the M-KESHO product. M-
KESHO is the first bank product with a real-time link to M-PESA for deposits and
withdrawals via an easy-to-use SIM-based menu. It is branded by both Equity
Innovationen / Volumen 6, number 4
53
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
Figur 1. Diagram of Sample M-PESA/M-KESHO Transaction
Bank and M-PESA and can be opened directly at an M-PESA agent. The two main
elements that differentiate the M-KESHO product from others is that both
deposits and withdrawals can be initiated through the SIM-based menu, als
opposed to relying on the less user-friendly USSD menu. Figur 1 shows the
mechanics of M-KESHO’s interface with M-PESA. Zusätzlich, and perhaps more
importantly, the product was marketed and branded as a joint effort, which prob-
ably boosted initial uptake substantially.5 In November 2010, Equity partnered
with the mobile operator Orange and launched its own mobile money product to
try to increase competition with M-PESA. Along with the cash merchant network
Orange plans to develop, Equity will establish its own cash merchants, thereby fur-
ther increasing customers’ access to financial services through mobile money.
No financial services provider other than Equity Bank has managed to inte-
grate directly with M-PESA. No formal interface exists for the others, und sie sind
forced to adapt the Pay Bill function to facilitate deposits and the bulk payments
web menu for withdrawals, as described below.
Deposits through the Pay Bill feature. Pay Bill can be accessed from the M-PESA
SIM menu. It allows customers to transfer money from M-PESA to their bank
54
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
account, although they are not able to withdraw funds. The customer experience
is similar to paying a bill: she selects Pay Bill, enters the short code for the recipi-
ent, which M-PESA calls a “business number,” as well as her own account number,
as she would, Zum Beispiel, with an account number at the power company. Das
directs a transfer to be made from her electronic “wallet” to the bank’s biller
account. Most banks allow deposits through the Pay Bill channel, even if they have
not yet managed to facilitate withdrawals through M-PESA.
The Pay Bill feature can also be used to connect to other financial accounts.
Kenya Women Finance Trust bank, Zum Beispiel, is a microfinance institution that
leverages M-PESA’s Pay Bill feature to enable customers to make loan payments.
The CIC Insurance Company uses M-PESA’s Pay Bill to allow customers to pay
insurance premiums using a mobile phone. Customers can save Ksh 140
(US$1.75) every seven days, earn interest, and access immediate life insurance cov- erage of Ksh 50,000 (US$625), which increases to Ksh 100,000 (US$1,350) by the twelfth year. The company absorbs the remittance charges that M-PESA places on Pay Bill transactions. Figur 2 (following page) shows the mechanics of a Pay Bill feature transaction. Withdrawals using bulk pay and USSD. A subset of financial institutions enables customer transactions through M-PESA in the other direction (d.h., mit- drawals) using a bank-run USSD menu. Institutions pursuing this approach include Barclays Bank of Kenya, Kenya Commercial Bank, Co-operative Bank, NIC Bank, Family Bank, K-rep Bank, Kenya Post Office Savings Bank, and Faulu Kenya. In order to process a withdrawal, customers have to link to their bank’s m-bank- ing platform by dialing a USSD code (Zum Beispiel, *498# for Kenya Post Office Savings Bank). Funds are then transferred from the bank account to Safaricom and into the customer’s M-PESA wallet. Once the funds are deposited into the wallet, the customer receives a message that funds are available. Banks typically automate the high volume of withdrawals using M-PESA’s web-based interface for bulk payments. Since this web interface is designed to be used manually and no API exists to integrate with this page, financial institutions typically write a custom built screenscraping application. This application manip- ulates the web page like a real user, uploading payments in real or near real time and sending them to clients who have requested a withdrawal. Screenscraping techniques are notoriously unstable, and many providers’ interfaces have broken down when Safaricom made even minor changes to the web interface. Figur 3 shows a diagram of the mechanics of a transaction using the USSD channel. Neither the Pay Bill deposits nor the bulk payment withdrawals need to be real time because the bank does not have to credit the client account immediately. Stattdessen, providers typically send the bulk pay transactions in a batch on a set fre- quency; Jedoch, most do this every few minutes. Leveraging bridge-builders. Some financial institutions also leverage bridge- builders to facilitate connections with M-PESA, either by building custom applica- tions to facilitate integration or by offering middleware applications that automate the integration process for multiple smaller institutions. Zum Beispiel, Meru innovations / Volumen 6, number 4 55 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023 Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard Figure 2. Diagram of Pay Bill Feature Transaction Mwalimu SACCO integrated its products with the M-PESA platform through Spotcash, a service that allows members of SACCOs and microfinance institutions to withdraw and deposit their money from and to their savings account, bzw- aktiv, through SMS, USSD, IVR (interactive voice response), or WAP (wireless application protocol)6. Once the withdrawal request has been received, the money is transferred to the member’s M-PESA account. The cost is Ksh 10 per transaction (US$0.12), not including SACCO fees or Safaricom withdrawal fees. Ein anderer
example is Celullant, which has developed integration solutions for many banks,
including a platform for the World Council of Credit Unions, that will enable
SACCO to connect with M-PESA.
Innovators
Innovators are new entrepreneurial ventures or products with a purely mobile
money-based business model for financial services.7 They fall into two categories:
existing providers developing new types of products that only operate through the
mobile money channel, and new entrepreneurial ventures launched around
mobile money-based products. In both cases, the new products facilitate transac-
tions through the mobile phone and mobile money agents, rather than through
legacy channels like retail bank outlets or sending money by check or money order.
Savings and insurance seem to be particularly popular financial products in this
Raum, probably as a result of the need for frequent small-value transactions that
would be expensive to facilitate through normal retail channels—both for clients
who would have to travel further and for institutions that would have to maintain
a retail channel.
56
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
Figur 3. Diagram of USSD Transaction
Examples of innovators. Our research uncovered a number of newly launched
savings, Kredit, and insurance products for which mobile money is integral to their
delivery model. These products run on the mobile money platform and help low-
income Kenyans save for retirement, Gesundheitspflege, and other needs, to borrow, oder zu
open small-value insurance contracts. Many are targeted at customers who do not
have steady incomes and cannot afford to make regular monthly lump-sum pay-
ments and thus appreciate a service that allows them to make small-value pay-
gen. A few sample products include:
• Zimele asset management offers a new pension scheme in which clients can
remit a deposit of as little as Ksh 250 (US$3.13) on a regular basis via the Pay Bill feature and earn interest at a rate of 8.5 percent quarterly. Zimele started this in late 2008 and claims it is getting a good response from depositors who want to avoid traveling to the head office to pay installments. • The Jua Kali Association (an association of self-employed informal workers) offers a new pension product that can be funded through mobile money, inkl- ing M-PESA. Users can save for retirement via the Pay Bill feature starting at Ksh 20 (US$0.24). This product has allowed Jua Kali to more than double the num-
ber of pension accounts in only six months.
• Changamka Microhealth, Ltd., offers a medical savings plan for out-patient and
maternity health care for expectant mothers. Customers use M-PESA’s Pay Bill
function to save small contributions to a smart card, where the money is locked
in for use when one falls ill or needs maternity care. In selected clinics, customers
can pay for medical services at a discounted rate using the smart card.
Innovationen / Volumen 6, number 4
57
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
Contributions to the smart card can also be made via M-PESA from family
members, friends, and other community members.
• UAP insurance company partnered with the Syngenta Foundation for
Sustainable Agriculture and Safaricom to help farmers insure against drought
when they buy certified seeds and fertilizers through a program called Kilimo
Salama (safe farming). This scheme offers a micro-insurance policy to small-
scale farm holders who plant on as little as one acre. It covers them from finan-
cial losses caused by drought or excess rain. Dealers are equipped with a camera
phone that scans a bar code at the time of purchase and immediately registers
the policy with UAP Insurance through Safaricom. An SMS confirming the
insurance policy is sent to the farmer through the mobile phone. When data is
transmitted through the Safaricom network from a particular weather station
indicating that extreme weather conditions are going to cause crop failure, all the
farmers within the region of that station automatically receive a payout via M-
PESA. Im September 2010, rain shortfall in the Embu region allowed over 100
farmers to receive an insurance payment via M-PESA. This was the first crop
insurance claim to be paid through a mobile payment system.
• M-PESA has also enabled the launch of entirely new service providers, einschließlich
a virtual microfinance institution named Musoni. Musoni only offers credit
services, although they hope to provide deposit services in the future, and all
operations are cash free, with disbursements and repayments done through M-
PESA’s Pay Bill feature. Zusätzlich, Musoni has developed a server that creates
reports based on data provided by Safaricom and facilitates lending operations.
Musoni customers are not charged for repaying through M-PESA or for the loan
disbursement through M-PESA. The customer is only responsible for paying the
cash-out fee from their M-PESA wallet.
Bridge-Builders
As financial service providers and other businesses struggle to integrate with M-
PESA, a mini-industry of software developers and integrators has started to spe-
cialize in M-PESA platform integration. A number have also built and begun mar-
keting their own middleware applications, which usually specialize in facilitating
certain types of integrations. These bridge-builders fall into two broad categories:
those that are strengthening M-PESA’s connections with financial institutions for
the delivery of financial products, and those that are strengthening M-PESA’s abil-
ity to interoperate with other mobile and online payment systems. The lack of
functional M-PESA API is hindering bridge-building, but several companies have
nonetheless devised tools for new financial functions and online payments.
Connectors with financial service providers. A number of technology companies
are facilitating mobile money’s connections with financial institutions, especially
small financial institutions struggling to integrate with M-PESA. Tangazaletu, für
Beispiel, is developing a set of tools to integrate financial systems with M-PESA
through an application called Spotcash, which allows members of SACCOs and
58
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
microfinance institutions to deposit and withdraw money to and from their sav-
ings accounts through the Pay Bill or a USSD menu at a cost of Ksh 10 (US$0.12) per transaction. A number of other providers are building or offering similar con- nections to M-PESA for small financial institutions, such as Kopo Kopo and Coretech Systems. Zege Technologies has developed an M-PESA integration, automation, and aggregation solution called MPAYER, which eases the process of frequent payments to and from M-PESA by processing payments on demand. Pay Bill transactions are currently manually processed in batches at scheduled times, thereby causing delays and resulting in errors. Connectors with other mobile and online payments. Other technology compa- nies are strengthening mobile money’s ability to interoperate with online payment systems. Webtribe’s Jambopay, Symbiotics’ Moca, Intrepid Data System’s iPay, and Pespal are a few examples of payment services that allow buyers to pay for goods and services over the Internet using their phones. We found mention of over 20 companies that were performing this type of integration or writing their own middleware applications to facilitate it. Although not all of them operate in the financial services space, a significant number are pre- senting strong evidence that there is sustained demand from financial services players to adopt the mobile money platform. MOTIVATIONS FOR ADOPTION AND PERCEIVED BENEFITS FROM MOBILE MONEY In surveying the landscape of financial service providers that are harnessing the mobile money platform and the software development firms that are facilitating integrations, a few common themes emerge. Providers state a number of different reasons to adopt mobile money, most of them related to expanding geographic outreach and facilitating payments more cheaply. Some benefits accrue mainly to clients, some to suppliers, but there are also several mutually beneficial features of mobile money integrations. From the client perspective, integrating with mobile money increases the den- sity of access points and the reach of access points in new areas, transforming the geographical distribution of delivery channels. Many financial service providers cite the lower cost in time and money for clients who want to make payments and deposits or receive insurance payments, withdrawals, or loan disbursements. Smaller institutions in particular lack widespread distribution networks (some have only a single branch) and thus can benefit from plugging into an ubiquitous, low-cost retail delivery channel. Some institutions also report that the existing ATM network is not well situated for the poor. Zum Beispiel, Nayndarua Teachers SACCO notes that ATMs are clustered around wealthier and urban areas far away from their low-income and rural clientele. Providers may also gain from behavioral and other benefits. Savings clubs can have more efficient meetings because more time can be spent attending to business and less to counting the money that members brought in for payments.8 innovations / Volumen 6, number 4 59 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023 Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard Furthermore, because the mobile money platform provides real-time remittance transactions and feedback (including instant SMS receipts), it can help build trust and promote savings and repayment behavior. There may be additional benefits to clients’ having all their financial relationships and transactions available through a unified interface that is with them at all times—that is, their mobile phone. From the supplier perspective, there are a number of benefits afforded by the reduced need to deal with cash. Several providers suggest that keeping money in electronic form with clear records of every transaction is valuable in reducing the risk of theft and misappropriation by employees. Providers are also able to save on cash-handling and collection costs. By removing the need to keep retail locations and field agents stocked with cash, many costs and risks are removed for both sav- ings and lending operations. Zum Beispiel, with its purely mobile-based business model, Musoni hopes to maintain very low-cost operations. This not only reduces costs for the provider, it can also enable previously unprofitable small-value trans- actions—although M-PESA’s transaction fees are still too high to generate this benefit in significant amounts. Not having to handle cash also frees up staff time to focus on sales and other important tasks. This is especially valuable for smaller financial institutions, such as SACCOs and other small financial services that value individualized sales and customer service for low-income customer segments (through their closer connec- tion with this client base) but that are poor at service delivery. CHALLENGES PROVIDERS FACE INTEGRATING WITH MOBILE MONEY IN KENYA Many providers report that building mobile money into new and existing products has posed challenges at all levels, from the operational to the strategic. The most common complaints are as follows: Cost of transactions is the main barrier to integration with mobile money, espe- cially M-PESA. The high cost of M-PESA transactions, which can amount to more than US$1.00 for a round-trip deposit and withdrawal transaction (though clients
and institutions usually split this cost in some way), is a significant barrier for
offerings where frequent small payments are necessary. Providers are excited about
the ability of M-PESA to facilitate low-value transactions—many of the innovative
products linking to M-PESA allow very small transactions—but M-PESA’s fees are
still too high to be viable for the client, especially the person-to-person fee of more
than US$0.40. Many providers cite this as a key barrier to reaching lower income
clients, who prefer to risk storing the money at home or saving through other
informal means than to pay these fees. Infolge, some providers, such as Kenya
Bankers Sacco Society, Musoni, and Zimele Asset Management, cover all or a por-
tion of the fees charged by M-PESA. Although M-PESA transaction fees were cost-
effective when building the business, especially when compared with traditional
retail channels, they are limiting the viability of smaller value transactions and thus
limiting outreach to the poor. With Equity Bank/Orange entering the market and
60
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
Airtel Mobile money currently relaunching the ZAP product, Safaricom may even-
tually face some pressure to reduce prices on transfers.
Integration costs and poorly performing M-PESA APIs are a key challenge. Ein
equally common complaint is that integrating with mobile money is difficult and
M-PESA has no real API to speak of. As detailed above, most providers have to
hack together a system whereby clients access a session-based phone menu (USSD)
to enable withdrawals via the web interface and use M-PESA’s Pay Bill function to
send money back the other way. Neither mechanism is optimized for the tasks they
are performing, and the Pay Bill function actually requires most financial service
providers to have a custom integration to collect client data, link it to information
received from M-PESA, and input both sets of information directly into their
back-end systems. The poor API functionality causes many institutions to incur
large integration costs, and they suffer from poor performance and system down-
time whenever Safaricom’s interfaces change.9 This is especially problematic for
smaller institutions with limited in-house software development capability, Und
whose lower scale of operations combined with often older (even Excel spread-
sheet-based) back-end systems make integration a challenge.
While M-PESA’s API was considered the worst, other mobile money APIs in
Kenya are not much better. Yu-cash is lauded as having the best API, although its
extremely limited agent footprint and client base make it of little use to banks seek-
ing to reach the mass market.
Challenges of building and maintaining relationships with clients when offering a
service indirectly. While clients’ low levels of literacy, lack of familiarity with tech-
nology, and limited exposure to financial products are challenges many financial
institutions cite in dealing with the poor, these are exacerbated when mobile
money is used, as it implies less face-to-face contact with clients. Infolge, Die
large savings to banks and to clients from having fewer transactions with the teller
come at the expense of reduced client contact. This may make client outreach,
trust-building, Ausbildung, and cross-selling more challenging, especially for
providers that do not have brand recognition. Mamakiba, Zum Beispiel, is an early
stage venture that offers pre-paid prenatal care and childbirth services to allow
mothers to save for births rather than borrow. Given the lack of face-to-face con-
tact and the unknown brand, clients were at first skeptical that these services would
actually be available when they were ready to give birth. Mamakiba had to count-
er this with extra client outreach to establish trust.
We believe reduced direct client contact is a fundamental challenge that is cre-
ated by the efficiency-enhancing separation of the cash transaction service func-
tion from the customer service and sales functions. These functions used to be
combined in one retail outlet where they overlapped, facilitating client contact and
client relationship management whenever someone came in to deposit or with-
draw cash. Now they are separated, challenging providers to develop new models
for fostering positive interactions with customers. One potential bright spot is that
while mobile money is a payment service, it comes through a mobile phone, welche
Innovationen / Volumen 6, number 4
61
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
facilitates new ways to communicate with customers via text and voice messages.
Some providers are already experimenting in this area.
Other issues reported included lack of phones among some of the poorest
Kenyans—many poor Kenyans borrow phones from others, making it difficult for
financial service providers to confirm a client’s identify before allowing them to
withdraw money or receive funds—and poor service, including lack of float at the
agent or downtime of the mobile operator’s network.
CONCLUSIONS
M-PESA was launched only four years ago, and its rate of uptake in the population
has taken even Safaricom by surprise: über 70 percent of households and 60 pro-
cent of adults in Kenya use it regularly.10 Existing financial service providers offer-
ing new or enhanced products and entrepreneurs seeking to hatch new ventures
have had little time to develop and test business models. Trotzdem, our prelim-
inary investigations in Kenya reveal a growing demand from banks, microfinance
institutions, and SACCOs and other financial service providers to connect their
products to the platform provided by M-PESA. We found few financial institutions
that did not have some form of mobile money integration completed or under
Weg, and documented 90 specific cases that did.
We also uncovered a number of new entrepreneurial ventures that exist solely
on the mobile money platform, although none of these startups had yet generated
a significant volume of business. While the level of transactions going to and from
the financial system through these newly enabled mobile money channels is still
relatively low, according to anecdotal evidence, and it does not yet seem likely that
large numbers of new poor clients are being reached because of mobile money,
these are nonetheless the early days, and the level of activity is already striking.
Aus diesem Grund, we believe mobile money has great potential to become a “cat-
alytic platform.” The variety of new models and approaches being tried could por-
tend a fairly fundamental realignment of the cash-based financial sector—a move
from all cash transactions being mediated by expensive retail infrastructure to
greater use of electronic payments through cell phones. Outsourcing cash han-
dling not only will allow financial service providers to serve their clients at lower
cost per transaction but also will allow them to get more value out of their exist-
ing front-office infrastructure and staff as they focus on more sophisticated tasks,
such as customer service, cross-selling, risk evaluation, usw. On the client side, cus-
tomers will gain access to a dense network of transaction points, greatly reducing
their costs to access financial services. Darüber hinaus, once clients are in the financial
system and able to transact at a low cost with financial service providers, the plat-
form enables them to access a whole new set of services and delivery models that
were not previously possible or profitable.
Jedoch, whether mobile money will achieve this vision in Kenya depends on
operators’ and financial service providers’ ability to overcome three major chal-
Längen:
62
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
An Emerging Platform: From Money Transfer System to Mobile Money Ecosystem
• Prices on transfers, especially through M-PESA, must be reduced
• Mobile money providers, especially M-PESA, must lower integration costs and
develop a useful set of APIs
• Financial service providers must develop fundamentally new models for foster-
ing relationships with customers when face-to-face cash transactions and the
retail infrastructures associated with them are a thing of the past
If mobile money and financial service providers can overcome these chal-
Längen, Kenya’s retail financial services market will be poised for a transformation.
1. Historians of technology have long noted the economic and social changes wrought by new infra-
Struktur, such as electrical power and rail. See Thomas P. Hughes, Networks of Power:
Electrification in Western Society, 1880-1930, Baltimore: Johns Hopkins University Press, 1992. Für
a cautionary tale, see Wolfgang Schivelbusch, The Railway Journey: The Industrialization and
Perception of Time and Space, Berkeley: University of California Press, 1987.
2. Economists often refer to mechanisms that bring together multisided markets as a platform.
Multisided markets are those where each side benefits the more the other sides participate. Ein
example would be video game consoles, which bring together game players and game producers,
and where players benefit from a wider variety of game producers and game producers earn more
when there are more players.
3. For more on the history of the M-PESA products, see Ignacio Mas and Daniel Radcliffe, Mobile
payments go viral: M-PESA in Kenya, The Lydian Journal. Available at http://pymnts.com/mobile-
payments-go-viral-m-pesa-in-kenya/ 2010; for more on the mechanics of how M-PESA’s retail
network works, see Frederik Eijkman, Jake Kendall, and Ignacio Mas, “Bridges to cash: the retail
bei
end of M-PESA,” Savings & Development
http://ssrn.com/abstract=1655248 2010.
(2010). Verfügbar
34, NEIN. 2
4. See http://technology.cgap.org/2010/03/08/mobile-money-takes-off-where-is-the-innovation-in-
product-design/.
5. It’s not clear whether this interest will be sustained, Jedoch, as the rate of uptake slowed signifi-
cantly after the product launch. There were approximately 600,000 accounts opened in the few
months after launch in May 2010, but the rate of activations dropped dramatically in the fall of
2010. The high price of deposits and withdrawals and difficulties in the relationship between
Equity and Safaricom have contributed to the stagnant growth of the product.
6. SMS refers to the Short Message Service/text message functionality of the phone. SMS messages
are processed via a store-and-forward system and are not real-time transactions. SMS is linked to
the phone’s SIM and are thus carrier dependent. USSD is Unstructured Supplementary Service
Data sent by all phones to towers and are carrier independent. IVR is Interactive Voice Response
voice-recognition and activation functionality, and WAP is the wireless application protocol for
accessing web pages on mobile phones.
7. Most of the innovators link to M-PESA using one or more of the integration options outlined in
the Integrators section.
8. Anecdotally, practitioners report that monthly savings group meetings can be hours long, Und
much of the time is taken up by publicly counting cash to verify that records and bookkeeping are
accurate.
9. We feel there are two main features of a “good” API: predictability of API management from the
provider and ease of use, which may or may not be related to degree of openness or adherence to
industry standards; a user-friendly API might still be a walled garden or adhere to its own set of
Standards, Zum Beispiel. It is hard to program when the system might change without warning and
when the system is not designed to be open to third-party programmers. Safaricom has no formal
API management process, and when changes are made to the interface, financial institutions are
left scrambling to fix them, regularly leaving their systems down for up to days at a time.
Innovationen / Volumen 6, number 4
63
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
Jake Kendall, Bill Maurer, Phillip Machoka, and Clara Veniard
10. See Tavneet Suri and Billy Jack, “Mobile Money: The Economics of M-PESA” [NBER Working
Paper No. 16721], 2011.
64
Innovationen / Inclusive Finance
Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/6/4/49/704824/inov_a_00100.pdf by guest on 08 September 2023
