Page 391 - Introduction to Electronic Commerce and Social Commerce

378 11 Electronic Commerce Payment Systems and Order Fulfillment

new system was simply “Send money home,” although the sys- adding airtime to a phone. There are fees for transferring and
tem had broader financial capabilities. withdrawing funds. They pale in comparison to fees charged
The task of sending money was relatively straightfor- by the MTOs and by ATM machines. There are also restric-
ward. First, the sender and the receiver had to have mobile tions on the maximum amount of money you can store in
phones that supported texting, which virtually every mobile your account and the amount of money you can transfer at
phone has regardless of the underlying technology. Next, any given time. There are a variety of reasons for these
they had to get Safaricom SIM cards. Once they had the SIM restrictions. First, a majority of customers are poor so the
cards, they had to register with an M-PESA agent. All that system is focused on their needs. Second, they don’t want the
was required to register was an identity card, something that system to be used for illegal purposes (e.g., money launder-
every Kenyan had. Once registered, the network sends an ing). Third, and most importantly, M-PESA is not a bank.
updated menu to the registered customer’s mobile phone. At Monies that are held in a trust owned by Vodafone (the major
this point, the system is ready to go. To actually send money, shareholder) and deposited in commercial banks.
a registered customer first deposits cash to his or her account.
This is done by giving cash to an M-PESA agent who imme-
diately credits it to the customer’s account. The network The Results
sends a text message to verify the deposit. Once, it’s in the
customer’s account, he or she can send money at any time by By virtually every measure, M-PESA has been a major suc-
selecting “Send money” from the M-PESA menu and then cess (Vodafone 2016). The program started in Kenya but now
entering the recipient’s phone number. At this point, the operates in 11 countries. In 2014/2015 it had 23.4 million
sender is prompted for his or her M-PESA pin number and customers, 240 K agents, and handled 3.4 billion transac-
then selects “Ok.” Next, the system sends a message to the tions. In Kenya there are over 20 million subscribers (which
sender confirming the transfer and the recipient’s name. In is about 50% of the entire population and 90% of the adults).
turn the recipient receives a message with the sender’s name There are also over 80,000 M-PESA agents. The value of
and the amount transferred to his or her account. transactions flowing through the system in Kenya is around
On the other end, a recipient can now go to a local two trillion Kenyan Shillings (which converts to about 20
M-PESA agent to pick up the money. Actually, the recipient billion dollars U.S.).
is basically making a cash withdrawal from his or her The capabilities of the system have also expanded and
account. It’s done by showing the agent his or her identity now include: sending money to another M-PESA customer;
card, choosing “Withdraw” cash from the menu, entering the paying bills (e.g., utilities); buying goods from merchants;
agent’s ID number, and then entering his or her M-PESA pin withdrawing money from ATMs; receiving money from
number. Once the transaction is confirmed, the agent distrib- abroad; and receiving or paying salaries. Essentially,
utes the cash. M-PESA has become a mobile e-wallet.
Obviously, a major key to the success of the system is the Additional systems have also been integrated to M-PESA
M-PESA agent network (Stahl 2015). It has been described to provide other financial services. For instance, the
as a network of “human ATMs.” An agent might be a local M-SHWARI system and a new entry (KCB M-PESA) offer
grocer, or gas station owner, or a post person, etc. They were M-PESA customers savings and loan capabilities. By early
recruited through a thorough selection and vetting process. 2015, M-SCHWARI had about ten million customers.
Many of them were also selling mobile airtime for Safaricom. As noted above, M-PESA now operates in other countries
They receive regular training and are frequently monitored. besides Kenya. This includes places inside of Africa (e.g.,
They are also restricted from doing business with other Tanzania), as well as outside of Africa like Afghanistan,
mobile operators. Outside of the due diligence process, the India, South Africa, and Romania. In virtually all of these
major hurdle for an agent is monetary. Agents have to pre- other countries, the Kenyan success has not been replicated,
purchase mobile money so they can sell it to customers for although the jury is still out in some of these (e.g., India). A
cash. Likewise, they have to sell cash for mobile money so number of critics have suggested that the success M-PESA
customers can withdraw funds. Both the cash and the mobile of Kenya rests on a series of circumstances that are hard to
money they manage are theirs, not M-PESA’s. Some agents replicate in other countries, including (Economist 2013):
do well, but for the majority it is a part-time job.
Less obvious is the fact that M-PESA is modeled after a 1. The financial sector basically had a hands off policy that
“prepaid” mobile phone system where consumers pay up- eliminated a number of regulatory hurdles encountered in
front for minutes rather than relying on credit and paying for countries.
minutes after they are used. In M-PESA you don’t need 2. Safaricom was close to a mobile monopoly in Kenya. In
credit approval up-front to open and use the system. the other countries the competition is much greater which
Essentially, you open an account and then deposit money. makes it harder, for example, to control things like the
There are no fees for making deposits nor are there fees for SIM cards used in phones or the mobile airtime.