Mobile Payments: Lessons from M-Pesa - A Detailed Overview
"Discover the innovative mobile payment system of M-Pesa, created by Vodafone and Sagentia, offering easy money transfers and microfinance solutions via simple SMS protocols. Explore the impact of M-Pesa on financial services in developing regions like Romania. Learn about the benefits and business flow of this convenient mobile payment provider." (284 characters)
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(Mobile) Payments, lessons from M-Pesa? Ruud van der Horst, consultant June 2011
Agenda What is M-Pesa? Pre-paid mobile phone Microfinance Mobile microfinance business flow What could this mean for Romania? May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 2
M-Pesa A Mobile Payment Provider (MPP), created by Vodafone and Sagentia (www.sagentia.com) Millions of subscribers Takes care of money transfers of (relatively) low amounts for B2C, C2B, B2B and C2C A subscription (=account) with M-Pesa is necessary, however no bank account is needed money must be stored with M-Pesa, before any transfer can be made there is a maximum to the amount which can be stored in M-Pesa Makes use of simple SMS protocols A very simple mobile phone is enough to use M-Pesa Safaricom s (=M-Pesa) local shops are used to store/get out the money in/from M-Pesa (in pre-paid phone terms: credit is bought in the local shops) Up till now no fraud issues in the media Is seen as that trustworthy that many accounts have (small) deposits with M- Pesa, although M-Pesa does not give any interest on the deposits May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 3
Agenda What is M-Pesa? Pre-paid mobile phone Microfinance Mobile microfinance business flow What could this mean for Romania? May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 4
Pre-paid mobile phone A subscription (=account) with a provider is necessary money needs to be stored with that provider any time contract services are used, the pre-paid credit with the provider decreases Millions of subscribers SMS services provided A very simple mobile phone can do the trick Credit can be bought in many shops May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 5
Agenda What is M-Pesa? Pre-paid mobile phone Microfinance Mobile microfinance business flow What could this mean for Romania? May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 6
From Wikipedia Microfinance is the provision of financial services to low income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services. More broadly, it is a movement whose object is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers." May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 7
Agenda What is M-Pesa? Pre-paid mobile phone Microfinance Mobile microfinance business flow What could this mean for Romania? May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 8
Mobile MF Business Flow (MF and M-Pesa) Applicant needs an account with M-Pesa Loan applicant All members need an account with M-Pesa Group Formation M-Pesa account is important part of static data of MFI clients Group Acceptance by MFI How to use M-Pesa account for loan processing Training / saving Application is conditional contract Loan application After Group approval, same day MFI approval Loan approval/Contract Travel to MFI/Wait for your turn/Receive money/Try to get money to destination and do not get robbed... Money transferred to Applicant M-Pesa account May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 9
Mobile Business Flow Loan repayment Travel to MFI (or Bank) and try not to get robbed/Wait for your turn/deposit money and do this as many times as your repayment schedule indicates.... Money transfer from client ( applicant ) to MFI May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 10
Agenda What is M-Pesa? Pre-paid mobile phone Microfinance Mobile microfinance business flow What could this mean for Romania? May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 11
What could this mean for Romania? There are great expectations for the usage of mobile phones in the payment landscape . However, what is worked on (and implemented) in Europe, USA and Asia is based on advanced technology. There are easier ways to start if we learn from the Mobile business flow in Micro Finance: 1. If transfer amounts are low, simple (low cost) SMS confirm protocols, suitable for the most basic phone, do work. 2. The infrastructure used for normal payments can easily be adepted to support mobile payments. We have done it with qPayIntegrator. 3. Pre-paid mobile phones have same characteristics as a debit card. Why not fully use these possibilities... May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 12
What could this mean for Romania? Issues to be solved: Is a legal framework necessary? (e.g. Kenya with > 10 million subscribers works up till now without such framework!) B2C, C2C and C2B has to work (easier than use all retail shops as cash office) (Cooperation between banks) User confidence May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 13
What could this mean for Romania? Issues already solved: High penetration of mobile phones (currently the mobile penetration is at about 115% - active users only; source Wikipedia) SMS traffic from banks May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 14
What could this mean for Romania? Why use this model? Support for easy money flows from (over)banked areas to under banked areas/individuals. (One of the objectives of Microfinance) To be considered for WR, pensions, wages etc. Worth to start building the business case? May 9, 2025 (Mobile) Payments, lessons from M-Pesa? 15
