M-pesa in Kenya Ignacio Mas and Dan Radcliffe, Bill & Melinda Gates Foundation1 March 2010




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A Simple Message Targeting a Big Pain Point


M-PESA was originally conceived as a way for customers to repay microloans. However, as Safaricom market-tested the mobile money proposition, they shifted the core proposition from loan repayment to helping people make P2P transfers to their friends and family. From its commercial launch, M-PESA has been marketed to the public with just three powerful words: “send money home.” This message was well adapted to the Kenyan phenomenon of split families discussed above and tapped into a major pain point for many Kenyans – the risks and high cost associated with sending money over long distances. This basic “e-remittance” product became the must-have “killer” application that continues to drive service take-up and remains the main (though not only) marketing message three years later. Although people have proved creative in using M-PESA for their own special needs, sending money home continues to be one of the most important uses – the number of households receiving money in Kenya has increased from 17 percent to 52 percent since M-PESA was introduced.18

A Simple User Interface


The simplicity of M-PESA’s message has been matched by the simplicity of its user interface. The M-PESA user interface is driven by an application that runs from the user’s mobile phone. The service can be launched right from the phone’s main menu, making it easy for users to find. The menu loads quickly because it resides on the phone and does not need to be downloaded from the network each time it is called. The menu prompts the user to provide the necessary information, one prompt at a time. For instance, for a P2P transfer, the user will be asked to enter the destination phone number, the amount of the transfer, and the personal identification number (PIN) of the sender. Once all the information is gathered, it is fed back to the customer for final confirmation. Once the customer hits ‘OK,’ it is sent to the M-PESA server in a single text message. Consolidating all information into a single message reduces messaging costs, as well as the risk of the transaction request being interrupted half-way through. A final advantage is that the application can use the security keys in the user’s SIM card to encrypt messages end-to-end, from the user’s handset to Safaricom’s M-PESA server.

Removing Adoption Barriers: Free to Register, Free to Deposit, No Minimum Balances


Safaricom designed the scheme to make it as easy as possible for customers to try the new service. They designed a quick and simple process for customer registration, which can be done at any M-PESA retail outlet. Customers pay nothing to register and the clerk at the outlet does most of the work during the process. First, the clerk provides a paper registration form, where the customer enters his or her name, ID number (from Kenyan National ID, Passport, Military ID, Diplomatic ID or Alien ID), date of birth, occupation, and mobile phone number. The clerk then checks the ID and inputs the customer’s registration information into a special application in his mobile phone. If the customer’s SIM card is an old one that is not preloaded with the M-PESA application, the clerk replaces it. The customer’s phone number is not changed even if the SIM card is.

Safaricom then sends both the customer and outlet an SMS confirming the transaction. The SMS gives customers a four-digit start key (one-time password), which they use to activate their account. Customers enter the start key and ID number, and they are then asked to input a secret PIN of their choice, which completes the registration process. In addition to leading customers through this process, retail outlets explain how to use the application and the tariffs associated with each service. Such agent support early in the process is particularly important in rural areas, where a significant percentage of the potential user base is illiterate or unfamiliar with the functioning of their mobile phone.


While the minimum deposit amount is around US $1.25, there is no minimum balance requirement. Customers can deposit money for free, so there is no immediate barrier to taking up the service. M-PESA charges customers only for “doing something” with their money, such as making a transfer, withdrawal, or prepaid airtime purchase.

Being Able to Send Money to Anyone


M-PESA customers can send money to non M-PESA customers, including any person with a GSM mobile phone in Kenya, whether they are subscribers of Safaricom or of any of the other three competing networks (Zain, Orange and Yu). Under this service, money is debited from the sender’s account, and the recipient gets a code by SMS which it can use to claim the monetary value at any M-PESA store. Thus, it’s an account-to-cash service, with the receiver’s experience being similar to how Western Union works today. The pricing on this service is interesting: customers pay a higher (roughly triple) P2P charge when sending money to a non-customer, but at the other end cashing out is free for a non-customer, whereas registered customers pay a cash-out fee of at least US $0.30. So why “penalize” the customer rather than the non-customer? Safaricom understood that the sender had power over the recipient, so it chose to put pressure on the sender to require the recipient to register with M-PESA. Furthermore, the non-customer got a great first experience with M-PESA when he received money for free, which Safaricom hoped would convince them to register for M-PESA.

Building Trust in the Retail Network


Safaricom recognized that M-PESA would not achieve rapid adoption unless customers had enough trust in the M-PESA retail network that they were willing to conduct cash-in/cash-out transactions through those outlets. Safaricom employed several measures to build that trust.
First, it closely linked the M-PESA brand to customers’ affinity with and trust in Safaricom’s strong corporate brand. As the mobile operator in Kenya with a dominant share (over 80% at M-PESA’s launch and scarcely less today), Safaricom was already a broadly respected and trusted brand, even among low-income customers. As shown in Exhibit 7 below, M-PESA retail outlets are required to paint their store “Safaricom green” which not only builds gives customers confidence that the store is acting on behalf of Safaricom, but also makes it easier for customers to locate cash-in/cash-out points.
Exhibit 7: A Typical M-PESA Retail Outlet

Second, Safaricom ensured that customers can walk into any retail authorized outlet and have a remarkably similar experience. This has helped to build trust in the platform and the outlets, and gives customers a consistently positive view of the service. Safaricom maintains this control over the customer experience by investing heavily in store training and on-site supervision. Safaricom chose to centralize these functions in a single third-party vendor (Top Image) rather than relying on its channel intermediaries (e.g. master agents) to cascade these functions to retail shops. A Top Image representative visits each outlet at minimum on a monthly basis and rates each store on a variety of criteria, including visibility of branding and the tariff poster; availability of cash and M-PESA electronic value to accommodate customer transactions; and the quality of record-keeping.


Third, customers receive instant SMS confirmation of their transaction, helping customers learn by experience to trust the system. The confirming SMS constitutes an electronic receipt, which can be used in dispute resolution. The receipt confirming a money transfer details the name and number of the recipient and the amount transferred. This allows the sender to confirm instantly that the money was sent to the right person—the most common source of error.
Fourth, Safaricom requires its outlets to record all cash-in/cash-out transactions in a paper-based, Safaricom-branded logbook. For each transaction, the store clerk enters the M-PESA balance, the date, agent ID, transaction ID, transaction type (customer deposit or withdrawal), value, customer phone number, customer name, and the customer’s national ID number. Customers are then asked to sign the log for each transaction, which helps discourage fraud and also gives agents a way to offer first-line customer care for customers querying previous transactions. Each entry in the log is written in triplicate. The top copy is kept by the retail outlet for his own records, a second is passed on to the store’s master agent, and the third is sent to Safaricom. Recall that all information contained in the agent log (except for the customer signature) is captured electronically by Safaricom when the transaction is made and is available to the master agents via their web management system. Hence, the main purpose of the agent log is not for record-keeping, but to provide comfort to customers who are used to having transactions recorded on paper.
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