The M-Pesa model demonstrates the beneficial impacts to society (government, firms and households) through reduced costs for financial intermediation, improved efficiencies in service delivery to the bottom of the pyramid, the productivity implications, the security benefits of going cashless, efficiencies in tax collection and the facilitation in spurring related innovations.
see video
http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/
Despite the overwhelming success in Kenya, similar successes has not been translated in other overseas jurisdictions. What are the barriers to successful diffusion in other jurisdictions ? Is the lack of success due to the resistance of the incumbent banking sector, the conservatism of the regulators, the different local cultures, the density / ubiquity of the smart phone penetration ?
Dear Clarke,
M-Pesa dynamics are indeed complicated stuff. I did an academic paper on the role of M-Pesa in financial inclusion and the trend is that the use of M-Pesa is motivated by an unbanked population which wants access to financial services. We may say that the success of Mpesa was driven by need more than structure or zeal! That, perhaps, could explain why other countries have struggled to come up with equivalents. We must also point out that in cases, absence of resistant institutions, especially informal, helps the acquisition of mobile money services. Mobile money in the fashion of Kenya is difficult to emulate as long as people have equally good opinions, besides purely mobile money; such as the credit and debit cards, on;ine banking and such. Even in Kenya, these alternatives are being used by banks to leverage on the consumer shifts from banks that insist on physical banking hall presence.
I'll try to gather something for you on this issue, subject to finding time...
Thanks and wish you well.
Thanks Muthoka,
It would be great to get some of your deeper insights.
In particular, your perspectives on the continuing harmonious dichotomy between M-Pesa services and the traditional banking services (cards & banking hall services) would be most welcomed
Best
Silburn
You might find this link interetsing.
http://www.theguardian.com/global-development-professionals-network/2015/apr/16/mobile-money-m-pesa-india-kenya-development
I believe it is a success which can be replicated in many other developing countries. The problem lies with the short term profitability of such ventures. I see similar ventures in my country but I feel that the local dynamics are different and the service providers struggle to provide a compelling reason to move to mobile money. We are after all well served with physical bank branches, ATMs and other forms of online payment. I think telecom providers and banks are not geared for such type of innovation because of their size, their lack of agility and the expected benefits. It would be better to have initiatives linked to an ecosystem where different providers can innovate collaboratively. This is my humble opinion only based on casual observation of local initiatives and not on any systematic study.
You may find a related publication I co-authored interesting.
Conference Paper An Open API to Monetize Mobile Micro-Services for Emerging Countries
Thanks for sharing Ravi,
In your jurisdiction would government payments services provide a compelling driver for adoption and if yes, what are the inhibitors for government adoption ?
Silburn
Currently the local authorities tried with utility payments. In Mauritius, utilities are semi-governmental and so the move was easier and they were already adopting other forms of payments. I believe paying for Government services would be great but I wonder how profitable they would be for the providers. I refer to the rule of thumb that for a service to be profitable, there should be 2.5 transactions per month per person. At our place, maybe the state-owned telecoms provider or bank could promote the service. I believe the people are ready to adopt mobile payments. As far as all Governments are concerned, the main factors of adoption are cost savings, increased compliance, impact on quality of life (i cannot say political impact). One important factor inhibiting adoption on the government side is the commission they have to pay as service provider - this has prevented them from widely adopting credit-card payments for example.
As I understand it, there is an issue with regulation of banking that differentiates Kenya from other countries. M-Pesa was given free reign to compete head on with banks without meeting their reserve requirements or guarantees. Also, as the Guardian points out, a financial transaction system may require a semi-monopoly situation both for that sector and the telecoms sector. Without it, someone would have a hard time paying across systems. Let me know if I am off base here.
In India, we have m-pesa and similar facilties provided by mobile service providers, but limited for payment of mobile services such as Post paid payment, Pre-paid charges, DTH services etc.,
One has to register the m-pesa account , then load money from bank account / credit card / debit card, then conveniently pay for the services availed.
Individual transactions bypassing bank is not allowed to curb the black money (tax evaded money) laundering, also landing into unscrupulous activities / elements.
No, however, it can definitely be one of the options for many consumers.
MPesa model worked in Kenya because of the lack of alternatives. The model is not the solution. Ultimately people need to connect with banks for their Savings, Credit & Remittance & other Services. MPesa can be an intermediate step in getting there. In India MPeas has not seen any great success.
I had answered this post 3 years ago on Indian context, but today india is far more advanced ....http://cashlessindia.gov.in/
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