Mobile Behavior: an Omnicom Group Company

Necessity is the mother of invention, they say, and that holds doubly true for developing nations, where innovation doesn’t always come from something new and cool. Sometimes it comes from familiar technologies applied in novel ways to fill the gaps left by inadequate infrastructure, poverty or geographic constraints.

Such is the case for the banking sector in regions of Africa and Asia, where millions of people have no access to banks – either because they don’t meet the institution’s requirements for opening an account due to a lack of formal employment, or because they live in an area inaccessible to banking infrastructure. Access to such services is a necessity for rural-area dwellers who depend on cash remittances from relatives employed in the nation’s urban centers or in foreign countries. In this case, necessity found its solution in SMS, the grandfather of killer mobile apps, as a way of broadening the reach of banking services in developing nations.

The M-PESA mobile banking initiative in Africa is a perfect example. Launched in March of 2007 by Safaricom (of the Vodafone group) in Kenya, M-PESA (‘pesa’ is Swahili for ‘money’) leverages Safaricom’s national network of airtime dealers as well as the affordability and ubiquity of SMS. It also provides a viable alternative to formal banks, which serve only 19 percent of Kenya’s ‘bankable’ population according to a 2008 survey.

Registered M-PESA customers can “deposit” hard currency with any M-PESA agent in exchange for e-money, which is uploaded into the customer’s M-PESA account. For 38 US cents, the customer can then transfer this money to another registered customer’s M-PESA account via SMS. Once the recipient receives the SMS confirmation, the hard currency can then be withdrawn from the nearest M-PESA agent, completing the money transfer process.

How does the M-PESA service benefit the average Kenyan? Olga Morawczynski, a PhD candidate at the University of Edinburgh who spoke at the GSM World Congress in Barcelona last February, shared the story of Martin, a shoe-maker in Kibera, an informal settlement just outside Nairobi. Martin makes about US$ 20 a day from his trade and sends a quarter of his earnings to his wife and mother, who live in Western Kenya, over 100 miles away. M-PESA saves Martin time, allowing him to work his trade instead of having to travel far outside his place of work to find a bank. The service also enables him to make frequent transfers – about 5 times a month – thereby allowing him to send a week’s earnings when his family needs the money most. Martin’s story as well as the results of Olga Morawczynski’s study can be found here.

Today, Safaricom’s M-PESA service has over six million registered users and 8,000 agents in Kenya. Since its inception, over US$ 1.7 billion in funds have been transferred, equivalent to about 5.5 percent of Kenya’s GDP, at an average transaction size of about US$ 30. M-PESA has attracted global attention and has won several awards, most recently for the 2008 Best Mobile Money Service award from the GSM Association. However, for the millions of “unbanked” individuals in Kenya depending on relatives’ remittances such as Martin’s family, M-PESA’s success means only one thing - food on the table now, instead of next week.

For more about M-PESA, download the case study here.

- David Zarraga