In Kenya, M-Pesa opens up financial horizons for small businesses and the unbanked

Since its launch in 2007, M-Pesa has evolved from a simple money transfer service to a platform serving a wide range of customers: unbanked consumers, younger digital natives, large businesses, and small to mid-sized enterprises (SMEs). It offers a diverse range of digital services across areas such as e-commerce, transportation, health, education, and entertainment.

M-Pesa is distinguished by its innovative business models, which replace transaction fees with subscriptions or revenue-sharing agreements with partners. By 2014, just seven years after its launch, M-Pesa was responsible for 20% of Safaricom's revenue. As of last year, that percentage had doubled to 40%.

Leading a financial revolution

The growth shows no signs of slowing. M-Pesa has revolutionized the way money is transferred and managed in Kenya, giving customers more control over their daily lives and saving them valuable time by digitizing essential activities.

For consumers, M-Pesa offers the convenience of online purchasing, discounts and rewards, referrals to new services, access to savings and loans, and the ability to carry out daily tasks on their mobile phones.

Businesses gain access to a wider market for their services, plus the efficiency of online processes with user-friendly dashboards and reports.

Huawei’s partnership with M-Pesa has been instrumental in driving its success by enhancing customers’ experiences, overall performance, and service innovation. Since the successful migration of the service to the Huawei platform in 2014, Huawei has invested in and innovated technologies to keep pace with the scale and expansion of the M-Pesa service over the last decade.

Here’s a quick look at the key innovations and their impact.

Enabling microloans. In 2014, M-Pesa introduced microloans, which provide credit to individuals previously cut off from the financial system. These loans have helped SMEs and entrepreneurs grow their businesses and improve their lives. This was made possible due to the existing M-Pesa financial activity being suitable for creating a credit profile that lending partners could use in their approval processes.

Seamlessly connecting systems. M-Pesa integrates with existing payment systems, allowing users to link their accounts to banks. This bridge between formal banking and mobile money services has driven financial inclusion and made transfers smoother than ever.

Empowering women. M-Pesa has had a profound impact on women, who often face barriers to financial services. With M-Pesa, women have gained control over their finances, enabling them to save, budget, and make independent decisions. This empowerment leads to gender equality and economic progress.

By offering faster, more accessible, and affordable financial services, M-Pesa has disrupted traditional banking models. Many previously unbanked individuals now rely on M-Pesa for their financial needs, reducing their reliance on physical banks.

M-Pesa's digital transactions have also reduced the reliance on cash in Kenya. Traditional banks have had to adapt to the preference for digital payments, changing the way they operate. 

Keeping up with M-Pesa

Hoping to challenge M-Pesa’s dominance, many of Kenya’s old-school banks have responded by developing their own mobile banking apps and digital payment solutions. Some have partnered with fintech companies to enhance their digital services and facilitate international transactions.

They have also begun implementing new marketing strategies. Many now use targeted ads on social media, along with personalized campaigns, to promote their digital services to a wider audience. They also focus on educating customers about the benefits of using digital services, including enhanced security and time-saving features. Banks incentivize customers to use digital services by creating loyalty programs offering rewards and cashback incentives.

Finally, to keep up with the evolving financial landscape, traditional banks integrate fintech services into their existing infrastructure. This allows them to offer innovative services such as peer-to-peer lending and digital wallets.

M-Pesa has revolutionized mobile finance in Kenya, bringing accessible and convenient services to the masses. Its impact on traditional banking is undeniable, disrupting traditional models, reducing cash transactions, and presenting challenges to physical banks.

But those banks have adapted by developing mobile apps, collaborating with fintech services, and implementing effective marketing strategies. Collaboration with fintech services, including M-Pesa itself, has allowed banks to enhance their digital offerings and stay competitive in today's ever-changing financial world.