M-Pesa, the most innovative mobile payment system

Think of a country where most of the people don’t have basic bank accounts. Most of the population live in outskirts or villages far away from city life. Robbery is the second name of the capital city -Nairobi. Yes, I am talking about Kenya, one of the most beautiful countries in Africa.

Around 2 years ago, the biggest mobile network operator Safaricom started a mobile money transfer system called M-Pesa which now became the most innovative mobile payment system throughout the world. It was created for responding the underbanked population for their basic money transfer needs. There was no legal infrastructure to regulate the system, government could do it after 6 months of the launch. Now it’s projected that almost one third of every Kenyan has an active M-Pesa account.

So, what is M-Pesa, how do people use it? M-Pesa is a money transfer program managed via cell phones. All the cell phones are compatible since the application was developed on the SIM card. All Safaricom SIM cards have the M-Pesa application pre-installed, so all you need to do is to register the service. Even I was -as a foreigner- able to register it within hours by using my passport only.

What really great is that there are no hardware terminals installed, both users and distribution network use the same SIM-centric approach. For registering, you simply need to apply to an M-Pesa agent. Agent keys in the typical personal information to his/her cell phone and you receive the notification in hours. The application is protected by a PIN, which is created during the registration, so it is secure enough.

With an M-Pesa account, you can send and receive money, withdraw cash from ATMs, shop at certain points and now the latest news is that you can even link your account to a bank account. What would an average Kenyan want more from a mobile network operator?

I personally consider M-Pesa as one of the most creative product based on a smart card platform. The SIM application alone enables the whole service as the heart of the system. Safaricom manages a pool account for all the money loaded in to M-Pesa accounts. Safaricom is not a bank, but now with the introduction of M-Kesho, people can open a bank account at Equity Bank and use the basic banking instruments through the M-Pesa application just by linking the M-Pesa account with the Equity Bank account. Another innovative step!

M-Pesa was a huge success, so Vodafone, the owner of Safaricom launched the same product in Tanzania, Afghanistan and is planning in India, Eygpt and South Africa.

It’s a true success of a smart card/SIM technology, yet I can consider as a contactless system since everything happens out of the contact interface!

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