InfoHub, Safaricom, Technology

Mpesa Africa: the evolution of a global money transfer behemoth

In April 2021, Safaricom announced the appointment of its Chief Financial Services officer Sitoyo Lopokoiyit as the inaugural Managing Director of MPESA Africa. The appointment is the culmination of the tremendous growth and near monopoly of the world’s pioneer mobile money sending and receiving platform. The creation of a continental division from a mere department is just a sign of how the platform has overtaken the financial world.

The M-Pesa App, an independent app that can be downloaded separately and be used on smartphones even without a sim card, is at the piloting phase as at the writing of this article. It continues to integrate various functionalities even as testing continues, and will be under the regulation of the Central Bank of Kenya while Safaricom will remain under the supervision of the Communications Authority of Kenya.

M-PESA is probably the most storied innovations to ever emerge from Africa. It has weathered storms and attracted controversy in equal measure in the course of its growth. Its genesis was a source of dispute among some quarters, but what is indisputable is that it was an idea whose time had come.

How did MPESA come about?

M-PESA sounds Kenyan, and operates in a Kenyan way. The answer you would get from majority Kenyans wouldn’t therefore be surprising were you to ask them who actually invented MPESA. The most publicised claims and court cases involving the concept’s patent as well as latter additional features are well captured in this series by’s Tefo Mohapi and Kenyan newspaper Business Daily.

The official credits for the innovation largely go to Nick Hughes and Suzie Lonie. Nick is said to have “led the team (that worked on Mpesa) from concept to scale in 2004 while working as the Head of Global Payments at Vodafone Group”. Vodafone is a shareholder in Safaricom, one of the most valuable companies in the world according to Forbes. Suzie was seconded by South African telco Vodacom, which was also a shareholder in Safaricom, to help scale M-Pesa.

However, one Paul Makin, a British banking executive claims that it is him and Nick who came up with the concept and the subsequent architecture, including the name M-Pesa. Suzie only joined six months later, according to Makin. “We talked as a team in a Nairobi bar. Came up with it, asked the batman (sic). He liked it, so it stuck.”

The beginning of success for M-Pesa

The short of it is that the M-Pesa concept was sold to the British government as a social responsibility project which would enable the unbanked majority in developing countries easily transfer money. That is how the DFID (now known as FCDO) came to fund the idea. Through Safaricom, the concept was successfully piloted in Thika in collaboration with Faulu Bank. (Read Tefo Mohapi’s indepth article about the piloting and launch). It was then rolled to Tanzania and Afghanistan with much success, and now mobile money is taking over the world.

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It is interesting to note that what started as a social responsibility project had grown into one of the most profitable businesses in the fintech world. Safaricom and Vodacom subsequently acquired Vodafone’s stake in MPESA in 2020 and now fully own it. The acquisition came on the heels of moving the servers that run the system from Germany to Kenya in 2015.

M-Pesa the ground breaker

MPESA officially launched in Kenya in 2007 marking a ground breaking moment that caused whirlwinds in the financial sector. While the platform launched as a social responsibility service, it was invading a sector that is tightly regulated. It was also targeting a ‘market’ segment that banks such as Equity were trying to win over – the unbanked low earning population, the same segment that for long was largely ignored or ‘turned away’ by larger banks such as Barclays and Standard Chartered which preferred civil servants and big businesses.

The gamble by MPESA and Equity Bank on this segment would years on pay off with Equity becoming the most profitable bank in Kenya and MPESA becoming a basic need for every business and individual. By the time the larger banks realised they were losing out, it was probably too late (Barclays would leave the Kenyan and African market altogether and sell its stake to ABSA).

At the time, internet or mobile banking was an alien concept, and even the Central Bank of Kenya was having problems understanding it, yet mobile phone penetration had increased tenfold in Kenya. People were using mobile phones to ‘send money’ in an ingenious way. One would buy airtime and send it to someone who needed money, the recipient would then resell the airtime to convert it to liquid cash. How about sending and receiving the money without the hassle of finding customers for airtime?

The ‘negligible’ market that the large banks had ignored started growing into small banks. M-Pesa required agents to enable people send and receive liquid cash. It was an opportunity that would employ millions, with agent kiosks doting every other corner and offering the services at a small fee. When you walk the streets of Kenyan towns and the innermost villages today, you wouldn’t fail to see the conspicuous green coloured Safaricom shop kiosks.

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Why is M-Pesa dominant?

MPESA was the first mobile transfer platform but it is not the only one today. There are many others that have come up in various countries, and in Kenya we have Airtel Money and T-Kash which use similar architecture.

So why is MPESA so dominant in the mobile money transfer business that the label has even become an idiom of sending money?

“MPESA me” has attained regular usage in Kenyan conversations, so that “to mpesa someone” means to send them money through the mobile phone, and it wouldn’t matter if you were using Airtel Money to do that. Marketing is a craft that Safaricom has mastered so well. The labels given to its services and products are so easy on the tongue and ear of the common man that it only takes a matter of days before they become part of daily language use.

For instance, Kenyans loosely refer to airtime cards as Bamba, a term that Safaricom used to refer to its lowest airtime scratch card of KSh 20. The term is now used for a scratch card of any amount, including those of other telcos. Bamba is a sheng word with multiple meanings, such as ‘take’ and ‘producing happy feeling’. To add to that, Safaricom is always on the airwaves, on TV screens, on road shows, in sports, on social media, and every other arena where they can splash the green colour. Their advertising is enormous. The other telcos are the exact opposite.

The fact that Safaricom used similar tactics employed by Equity bank to win the lower end of the consumer segment made many embrace its products even when some of them were obviously more expensive. We have already written about how Safaricom muscled its competitors to become the one of the most prestigious company in Africa. One of the tactics was to make its products more affordable at first. It introduced airtime cards for lower denominations, billed per second when others were billing per minute, and now introduced ‘banking agencies’ that welcomed the poorest who had been ignored by the mainstream banking industry.

MPESA has also effectively locked Safaricom subscribers to the company, meaning that they are more likely to use any of the other services by Safaricom. It’s easy to buy airtime via MPESA, and currently one can buy Airtel and Telkom airtime using the service. How colonising could it ever get?

At first, banks petitioned the Central Bank of Kenya to treat M-PESA as a bank and subject it to same stringent measures. They weren’t successful though as MPESA argued that it wasn’t offering credit facilities but was just a conduit for cash transfer. Some banks saw an opportunity for collaboration instead and are now offering credit facilities through M-PESA. Such are KCB, Equity Bank and NCBA through MShwari. Almost all banks have also integrated with MPESA for customers to transfer funds between their accounts and the mobile money platform from the comfort of their beds.

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Banks were definitely losing the case not from the courts of jurisdiction but largely the public. They probably needed MPESA more than the mobile platform needed them. The only recourse was to collaborate, and the first banks to jump onto the opportunity haven’t regretted. Salaries are now paid through MPESA, people access their bank accounts from the comfort of their beds and transact instantly. It does not have the limitations of a credit/card. People who have never seen a bank building in their lives can still bank their money with MPESA, which evolved from just being a transfer service.

And now with the growth of online shopping, MPESA has been integrated with almost all shopping platforms in Kenya, as well as global shopping giants such as AliExpress.

You can send money from abroad using MPESA global. MPESA GLOBAL enables one to send money to all countries where Western Union operates, and has links to banks in Germany, China and UAE, and the East African countries (Kenya, Rwanda, Tanzania, Uganda). Currently, Kenya and Tanzania are the largest mobile money transfer markets in the world. The possibilities with MPESA are just endless.

Its domination and monumental growth has seen pundits argue that it should be split from Safaricom. This is interesting, since Safaricom itself was a department of the Kenya Posts and Telecommunications Company (KPTC was later split to form Posta Kenya and Telkom Kenya, another telco competing with Safaricom today). And, it appears we are seeing that come into fruition. If MPESA Africa deals as a company by itself, it may be easier for other telcos and money transfer services to deal with it without worrying about limitations by the giant Safaricom mother company. The steep prices the service charges may just also drop. However, it is all wait and see at the moment.