Role of M-Pesa business solution

Table of Content

Executive Summary:

Invention chances are boundless and infinite, companies are fighting to fulfill clients or prolong growing and profitableness. Economic growing in Kenya has witnessed singular betterment in the last five old ages with existent GDP estimated at 7.0 % in 2007. This paper examines advanced nomadic solution in the nomadic money transportation service utilizing a instance survey from Kenya, stand foring the taking nomadic company Safaricom and launch of the M-PESA invention. The paper scrutinizes the strategic relevancy of the attack and acceptance of M-PESA, its execution and the competitory advantage of Safaricom. The paper besides presents the success of M-PESA and other advanced solutions that have emerged as a consequence of M-PESA launch. The decision gives recommendations on the function of direction of engineering in the organisation.


Telecommunication industry in Africa is the fastest turning industry. Survey by Ernst & A ; Young on February 6th 2010 shows that between 2002 and 2007, the telecommunication industry grew by 49.3 per centum as opposed to Asia which recorded a 27.4 per centum growing. Kenya was among the highest net endorsers per month at estimations of between 20 to 49 % .

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The figure of African mobile phone users has increased from 10 million in 2000 to more than 180 million in 2007. During 1992-2005, private sector investing in ICT substructure topped $ 20 billion but high monetary values of services remain a job. In 2007 the mean monetary value of prepaid Mobile services cost $ 12.58 a month in Africa, six times the $ 2 cost in Bangladesh, India, and Pakistan. [ 1 ]

The sector faces major challenges that need to be addressed for the industry to make its full potency. Among the major challenges faced is political instability in which the telecommunications operators have the fright of a possible and serious struggle. Another major challenge is the continents and more specifically regulative organic structures are non strong plenty. Most of the regulators have evolved from postal and telecommunication corporations and have been run by administrative officials who still want to play the regulative function alternatively of easing the concern. The regulators are appointed politically and hence interfere with the market all the clip. As a consequence there is a immense market which is run by merely one to three operators doing states have high call rates. South Africa is one good illustration of this scenario, its naming rates are one of the highest in the continent. Kenya ; our focal point in this subject is easy moving towards facilitation of concern in this sector following recent passage and amendment of the Kenya Communication Act and development of the model for incorporate licensing. The heavy revenue enhancement load on both consumers and operators is another major challenge. Kenyans, for illustration wage a revenue enhancement of 26 % on nomadic communicating and Safaricom our focal point company is the highest corporate taxpayer in the state. The industry is extremely profitable but return on investings could be delayed due to hapless substructure such as power outages in the state. Due to the rapid growing in the industry there is a immense attractive force of foreign involvement and operators unifying for illustration late Telkom Kenya and France Telecom merged. The nomadic web market portion in Kenya is distributed in the undermentioned ways:

The nomadic webs chief function is to supply mobile converged informations and voice communicating solutions. Among these merchandises and services offered bulk of the nomadic operators in Kenya offer money transportation service utilizing a nomadic phone. This is a comparatively new invention in Kenya that has achieved alot of involvement in the market. These fiscal services are divided into two sub sectors viz. ; nomadic money transportation which is an independent concern field that does non needfully affect Bankss and Mobile banking which can be described as the usage of nomadic telecommunication devices to entree fiscal services. An academic theoretical account definition of nomadic banking ( 1 ) refers to proviso and availment of banking- and fiscal services with the aid of nomadic telecommunication devices. The range of offered services may include installations to carry on bank and stock market minutess, to administrate histories and to entree customized information. [ 2 ] The debut of nomadic banking is an advanced scheme that fiscal services are utilizing to pull clients and ease on bringing of services. With the aid of internet new ways of carry oning banking services have been achieved. As a consequence new establishments such as on-line Bankss, on-line agents and money transportation service companies have emerged.

This paper analyzes the new advanced service of money transportation service utilizing nomadic phone. The focal point will be on the largest Mobile operator in Kenya SAFARICOM. It examines Safaricom?s advanced nomadic constructs and solutions. M-PESA is a Safaricom service that allows one to reassign money utilizing a nomadic phone. It assesses the nature of the M-PESA engineering, the constructs acceptance to the market, execution mechanism and the success rate. The paper besides identifies the consequences of this engineering in the market. ( Recommendations on the function of a director and the organisation to back up the direction of the engineering within the organisation. The paper?s construction is on the undermentioned subdivision 2 Safaricom and M-PESA construct and nature of the engineering, subdivision 3 looks at the execution, success rate and consequences of the engineering. Section 4 outlines the function of a director and organisation within M-PESA section and their support on the M-PESA map. Section 4 gives and analysis of the findings and short decisions.



Safaricom is ranked as the taking nomadic supplier of incorporate and converged voice and informations communications solutions in Kenya. Servicess offered by Safaricom include PrePay, PostPay, Data and messaging, M-PESA, Bonga Loyalty Scheme, Simu Ya Jamii and Preimium Rate Services.

The followers are the most recent cardinal high spots of Safaricom:

  • Its active endorsers presently stand at 14.51 million.
  • Subscriber market portion estimated at 77.5 % ( Source World Cellular Information Service )
  • A strong M-PESA service with 7.99 million registered users.
  • Gross market portion estimated at 83 %
  • Current turnover of Ksh 40.66 billion

M-PESA Pilot Project

M-PESA was originally created as a pilot funded jointly by Vodafone and the UK Department for International Development [ DFID ] Financial Deepening Challenge Fund. It is a nomadic money transportation service that allows one to reassign money utilizing a nomadic phone. It was launched in 2007. Kenya is the first state in the universe to utilize this service. It is offered in partnership between British cellular giant Vodafone and Safaricom. It is available to all Safaricom users both on pre wage and station wage duties. Latest studies from Safaricom show that M-PESA has reached nine million registered members in a state with a population of 31 million. In this population merely 5 million have bank histories. It is a service for both the banked and unbanked populations. It is a fast, safe and low-cost manner to reassign money by phone. The M-PESA service ab initio targeted the unbanked population but has now become the most popular and convenient money transportation service due to its low transportation charges and handiness in all rural countries of Kenya.

M-PESA was late extended to Kenyan Diaspora life in the UK who are able to direct money to their households in Kenya utilizing the M-PESA.

Key high spots of M-PESA.

  • One does non necessitate a bank history to utilize M-PESA. All one demands to make is register at authorized M-PESA agent utilizing their Safricom mobile figure and designation.
  • Put money into their nomadic history by lodging hard currency at a local Agent
  • Send money to other nomadic phone users by SMS direction, even if they are non Safaricom endorsers.
  • Withdraw hard currency at local a Agent
  • Buy Safaricom airtime for themselves or other endorsers
  • Merely Safaricom endorsers can direct M-PESA, but anyone who can have an samarium can have money by MPESA.
  • Cash is paid into M-PESA and withdrawn at M-PESA Agent mercantile establishments. These mercantile establishments are typically local Safaricom Dealers, but can besides be other sorts of retail merchant such as gasoline Stationss, supermarkets and local stores. There is presently a big web of M-PESA Agents across Kenya who have been trained to utilize the service. It is planned to turn this web significantly in the approaching months.
  • M-PESA has partnered with over 40 organisations both bank and non bank fiscal establishments in offering more efficient services.
  • There are presently 300 bank subdivisions that offer M-PESA services
  • It has over 7,000 agent mercantile establishments using more than 12,000 people straight and indirectly.
  • M-PESA records a day-to-day norm of 10,000 enrollments mundane
  • Customers can easy entree their money 24 hours a twenty-four hours. Safaricom has partnered with Equity Bank Kenya a fast turning commercial bank in a service that allows registered MPESA users withdraw money from the ATM without the usage of an ATM card
  • MPESA has won assorted awards for its invention both locally and internationally some of which are ; Kenya Banking Awards 2007/2008, the Marketing Society of Kenya Best merchandise invention 2008, the Stockholm Challenge 2008, World Business and Development Award 2008, GSMA 2008, Africom 2008.

MPESA Business Technology Evaluation:

In this portion this paper looks at the determination on a company?s right engineering. Vodafone?s and Safaricom?s launch of M-PESA can be followed through the undermentioned concern scheme and engineering direction:

Measure 1 Business Strategy and Plan:

The M-PESA theoretical account begun when Vodafone, the world?s taking telecommunications group took up a pilot undertaking with Safaricom. It is deserving observing that at the get downing Vodafone was to a great extent involved in establishing the merchandise. At the clip Safaricom was chiefly focused on turning their client base. This undertaking was initiated by Nick Hughes ( caput of International Mobile Payment Solutions Vodafone Group ) Nick sold the service thought to the executive staff of Vodafone who went in front with the undertaking.

The M-PESA theoretical account relies on three cardinal facets, simpleness of the merchandise, security and user experience.

Measure 2: Business Technology Evaluation:

Vodafone identified a market, Kenya as their pilot undertaking. This was based on the rating of the market demands and chances and availabiltity of engineering. Kenya offered an advantage for this pilot undertaking with Safricom because of several factors:

  • Safaricom is the largest Mobile operator in Kenya and has been constructing a successful client base.
  • Kenya is ranked as an emerging economic system whose economic system is chiefly hard currency based.
  • Mobile incursion in Kenya is high.
  • The merchandise is simple and easy to utilize driving the consumption.
  • Social economic sciences of Kenya.

Measure 3: Technology Strategy Development.

The procedure of invention is developed both internally ( within an organisation ) and partly outside an organisation. There were two major participants involved, Vodafone and Safaricom. In the initial phases of the pilot procedure, Safaricom provided support in footings of working infinite, client attention and finance squad, proficient integrating and support. Their engagement in the undertaking at its initial phases was hence less until the commercial launch when a big squad had to be involved in the undertaking.

Measure 4: Technology Planning:

While Vodafone group was to a great extent involved other little participants were besides included one such participant was Sagentia, a engineering consultancy house based in Cambridge UK. It played a critical function in the conceptualisation and development of the application. This steadfast wrote the package for M-PESA, designed the concern procedure, and provided the operational and proficient support during the pilot and after launch.

Measure 5: Execution Procedure:

During the execution procedure the system underwent different stages and design. ( John E. Ettlie 2006 P 105 ) asserts that ‘Using multiple prediction methods and fiting the appropriate method to the state of affairs are both ways to avoid gross prediction mistakes ‘ . The merchandise that Vodafone piloted prior to officially establishing M-PESA was really different from the one they now offer to clients. This former merchandise was much more complex, including characteristics such as group loaning theoretical accounts, group merchandises, and financial officer histories. During the pilot, they learned that much of this complexness had to be stripped off to run into a really specific, narrow demand from the client: individual to individual money transportations. This was all enabled due to research by the pilot squad who were closely supervising the use forms. Their findings were so fed back to into the design of the application. To make this, the squad had to trust on a flexible design. This has greatly paid off as M-PESA moves across other contexts which have really different demands and use forms.

Stage6: Consequences and monitoring:

M-PESA grew quickly exceling 2 million clients within its first twelvemonth of launch. Members of squad had to be on call 24/7 to decide system issues that kept cropping up. Dedicated squad work was really critical in success of the undertaking. M-PESA is merely the beginning of a platform which will make developmental services that penetrate other sectors. This is already being done as M-PESA division through Safaricom has so far entered into partnership with over 40 organisations both bank and non bank fiscal establishments in offering more efficient services.

In add-on, the user experience has been simplified. There are no signing-up fees and no minimal balances to confound the client with concealed fees or conditions. M-PESA ‘s user interface is intuitive. It works on really basic French telephones, and does non necessitate a smart phone. Since 90 % of the nomadic phones in the Kenyan market are non smart phones, it was imperative that M-PESA work on the simple devices that clients already had.

Secure: Vodafone has besides established a secure system that gives clients a sense of assurance. Minutess are completed within 15-30 seconds and clients receive an SMS verification that the money has been sent. Vodafone has a back-office system that tracks every dealing and makes it possible to rectify any mistakes and respond to client concerns. The full platform is data-rich and minutess leave a long paper trail doing the platform an unconducive topographic point for money launderers to run. Overall, M-PESA has high visibleness and Vodafone realizes that trust must be at the bosom of their concern theoretical account.

Value Chain Concept in MPESA Technology:

Porter identifies value concatenation as houses specific activities through which it creates competitory advantage. Safaricom has had to bring forth ace value services on M-PESA to be the leader in the market. The followers is a dislocation of the value concatenation services within Safaricom the umbrella company under which M-PESA operates. Primary activities include inward logistics, stock list and warehouse operations, selling and gross revenues, services aimed at keeping and bettering the merchandise value, client support and preparation. These are services that are outsourced by Safaricom to accomplish the undermentioned aims:

  • optimize costs
  • Agility in run intoing client demands and satisfaction
  • Creation of a centralized every bit good as distributed warehouse capacity to back up growing to assorted locations in which Safaricom operates.
  • Ensure service degree monitoring and coverage of client questions. M-PESA through Safaricom has entered into partnership with over 40 organisations both bank and non bank fiscal establishments in offering more efficient services.

Bing a blue bit company in East Africa, Safaricom ensures its support activities are of high quality. They include:

  • Firm substructure which includes general direction, finance, legal
  • Human resource
  • Technology development
  • Procurement

M-PESA?s competitory advantage can be attributed to the undermentioned factors:

Mobile Phone incursion in the market:

By the first one-fourth of 2006 the nomadic endorsers in Africa was at 147.4 million. Two old ages subsequently the figure has more than doubled to 301.7 million stand foring a incursion rate of 30.4 % . ( see note 11 ) Kenya ‘s incursion rate rose from 2 % in 2001 to 39 % as of the 2nd one-fourth of 2008. Kenya is the most developed nomadic market in East Africa and its incursion rate is forecast to make 67.5 % in 2012. ( see note 12 ) .As figure 1 show, the figure of nomadic endorsers in Kenya has grown enormously to over 16 million endorsers.

There are four nomadic operators that are presently active in Kenya. Safaricom has the largest portion of endorsers at over 14 million it is the clear market leader with an 81 % of the entire subscriber base. This fact has given M-PESA the advantage to perforate the market.

Need for entree to fiscal services:

Harmonizing to national study, as at 2007, 38 % of Kenyans had no entree to any signifier of fiscal services and merely 19 % had entree to formal fiscal establishments such as Bankss. ( Note 13 ) With over 10 million endorsers, M-PESA took off quickly because of the low incursion of banking services and the public demand for them. Though few surveies undertaken, there are several indicants that the un-banked have benefitted from M-PESA, the service offers convenience, velocity, and low dealing fees. For little concerns utilizing M-PESA makes them travel to the Bankss less frequently, passing more clip running their concerns.

Low dealing costs

M-PESA offers a really competitory service with low dealing costs therefore utilizing the cost leading technique. It is cheaper than utilizing a bank history. Given their apparatus and operational costs, it would be impossible for Bankss and money transportation companies to offer such low rates.

New Inventions from M-PESA

It is deserving observing as before stated in the paper M-PESA was originally created with characteristics of streamlining the micro finance operations. It was so narrowed to run into simple payment method and hence an chance to increase client keeping which it is has achieved.

Other unexpected utilizations have emerged for illustration all M-PESA clients can retreat money from PesaPoint ATM?s all over the state without an ATM card. This service has helped get the better of the job that agents sometimes do non hold adequate money to publish to M-PESA clients who want to retreat. This understanding and result has besides been a major milepost in associating M-PESA to the formal banking system.

Since December 2008, M-PESA has joined the international hard currency minutess market by subscribing into partnership with Western Union. This understanding was reached between Vodafone, Western Union and Safaricom, in which a cross-border nomadic money transportation service between U.K and Kenya was launched.


With the launch of M-PESA in Kenya other regional minutess are taking topographic point in which more regional cross-border system of money transportation and fiscal minutess will b achieved. The launch of M-PESA has seen more rival mobile webs come up with similar services.

There response towards the M-PESA invention has been a positive displacement doing it a critical tool to bring forth, retain and beef up Safaricom?s competitory advantage. Banks and non bank establishments have besides embraced this engineering as pointed out in the many partnerships created with M-PESA.

With an of all time increasing client mobility this tendency is expected to derive a higher impulse doing the nomadic channel an indispensable portion in transportation of little amounts of money state broad, regionally and internationally.


  1. World Bank Press Release No:2009/AFR/138
  2. Tiwari and Buse, 2007, p. 73-74

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Role of M-Pesa business solution. (2017, Jul 05). Retrieved from

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