Mobile Payments go Viral: M‐PESA in Kenya potx

 1 MobilePaymentsgoViral: M‐PESAinKenya IgnacioMasandDanRadcliffe,Bill&MelindaGatesFoundation 1  March2010  Abstract M‐PESAisasmall‐valueelectronicpaymentandstoreofvaluesystemthatisaccessible fromordinary mobilephones.Ithasseenexceptionalgrowthsinceitsintroduction bymobilephoneoperator SafaricominKenyainMarch2007:ithasalreadybeenadoptedby9millioncustomers(correspondingto 40%ofKenya’sadultpopulation)andprocessesmoretransactionsdomesticallythanWesternUnion doesglobally.M‐PESA’smarketsuccesscanbeinterpretedastheinterplayofthreesetsoffactors:(i) pre‐existingcountryconditionsthatmad eKenyaaconduciveenvironmentforasuccessfulmobile moneydeployment;(ii) acleverservicedesignthatfacilitatedrapidadoptionandearlycapturingof networkeffects;and(iii)abusinessexecutionstrategythathelpedM‐PESArapidlyreachacriticalmass ofcustomers,therebyavoidingtheadversechicken‐and‐egg(two‐sidedmarket)problemsthatafflict newpaymentsystems. 1. MPESAinaNutshell 2  M‐PESAwasdevelopedbymobilephoneoperatorVodafoneandlaunchedcommerciallybyitsKenyan affiliateSafaricominMarch2007.M‐PESA(“M”formobileand“PESA”formoneyinSwahili)isan electronicpaymentand storeofvaluesystemthatisaccessiblethroughmobilephones.Toaccessthe service,customers mustfirstregisteratanauthorizedM‐PESAretailoutlet.Theyarethenassignedan individualelectronicmoneyaccountthatislinkedtotheirphonenumberandaccessiblethroughaSIM card‐residentapplicationonthemobilephone. 3 Customerscandepositandwithdrawcashto/fromtheir accountsbyexchan gingcashforelectronicvalueatanetworkofretailstores(oftenreferredtoas agents).ThesestoresarepaidafeebySafaricomeachtimetheyexchangethesetwoformsofliquidity onbehalfofcustomers.Oncecustomershave moneyintheiraccounts,theycanusetheirphonesto transferfundstootherM‐PESAusersandeventonon‐registeredusers,paybills,andpurchasemobile airtimecredit.Alltransactio nsareauthorizedandrecordedinrealtimeusingsecureSMS,andare cappedat$500.   1 IgnacioMasisDeputyDirectorandDanRadcliffeProgramOfficerintheBill&MelindaGatesFoundation’s FinancialServicesforthePoor(FSP)team. 2 FormoredetailedaccountsoftheM‐PESAservice,seeHughesandLonie(2009)forahistoricalaccount,Masand Morawczynski(2009)forafullerdescriptionoftheservice,andMasandNg’weno(2009)forthelatest accomplishmentsofM‐PESA. 3 TheSubscriberIdentificationModule(SIM)cardisasmartcardfoundinsidemobilephonesthatarebasedonthe GSMfamilyofprotocols.TheSIMcardcontainsencryptionkeys,securestheuser’sPINonentry,anddrivesthe phone’smenu.TheShortMessagingService(SMS)isadatamessagingchannel availableonGSMphones.  2 Customerregistrationanddepositsarefree.CustomersthenpayaflatfeeofaroundUS40¢ 4 forperson‐ to‐person(P2P)transfersandbillpayments,US33¢forwithdrawals(fortransactions lessthanUS$33), andUS1.3¢forbalanceinquiries.Individualcustomeraccountsaremaintainedinaserverthatisowned andmanagedbyVodafone,butSafaricomdepositsthefullvalueofitscustomers’balances onthe systeminpooledaccountsintworegulatedbanks.Thus,SafaricomissuesandmanagestheM‐PESA accounts,butthevalueintheaccountsisfullybackedbyhighlyliquiddepositsatcommercialbanks. CustomersarenotpaidinterestonthebalanceintheirM‐PESA accounts.Instead,theforegone interest ispaidintoanot‐for‐profittrustfundcontrolledbySafaricom(thepurposeofthesefundshasnotyet beendecided). M‐PESAisusefulasaretailpaymentplatformbecauseithasextensivereachintolargesegmentsofthe population.Exhibit1showsthesizeofvarious retailchannelsinKenya. 5 Notethattherearenearlyfive timesthenumberofM‐PESAoutletsthanthetotalnumberofPostBankbranches,postoffices,bank branches,andautomatedtellermachines(ATMs)inthecountry.UsingexistingretailstoresasM‐PESA cash‐in/cash‐outoutletsreducesdeploymentcostsandprovidesgreaterconvenience andlowercostof accesstousers. Exhibit1:Outletsofferingfinanci alservicesinKenya 6     4 WeassumeanexchangerateofUS$1:75KenyanSchillings. 5 Kenyahasatotalpopulationofnearly40million,with78%livinginruralareasandaGDPpercapitaof$1,600. 19%ofadultshaveaccesstoaformalbankaccount.SeeFSDT(2009a)forfinancialaccessdataderivedfromthe FinAccesssurvey,anationallyrepresentativesurveyof6,600 householdsconductedinearly2009. 6 DatafromthistablewaspulledfromtheCentralBankofKenya,KenyaPostOfficeSavingsBank,andSafaricom websites. 440 800 840 1,510 16,900 100,000 1 10 100 1,000 10,000 100,000 PostBank branches Totalpost offices Bank branches ATMs M‐Pe sa stores Airtime rese llers  3 ASnapshotofMPESAafterThreeYears M‐PESAisgoingfromstrengthtostrength.AsshowninExhibit2,Safaricomreachedthe9million customermarkinunderthreeyears. Exhibit2:GrowthofM‐PESACustomerBase   ThelatestdevelopmentsandfiguresreportedbySaf a ricomasofJanuary2010are: 7   9.0millionregisteredcustomers,ofwhichthemajorityareactive.Thiscorrespondsto60%of Safaricom’scustomerbase,23%oftheentirepopulation,and40%Kenyanadults. 8   16,900retailstoresatwhichM‐PESAuserscancash‐inandcash‐out,ofwhichnearlyhalfare locatedoutsideurbancenters.  US$320millionpermonthinperson‐to‐person(P2P)transfers.Onanannualizedbasis,thisis equaltoroughly10%ofKenyangrossdomestic product(GDP).Althoughtransactionsper customerhavebeenonarisingtrend,theyremainquitelow,probablystillundertwoP2P transactionspermonth.  US$650millionpermonthincashdepositsandwithdrawaltransactionsatM‐PESAstores.The averagetransactionsizeisaroundUS$33,butVodafonehas statedthathalfthetransactions areforavalueoflessthanUS$10.  US$7millioninmonthlyrevenue(basedonthesixmonthstoSeptember2009).Thisis equalto 8%ofSafaricomrevenues.  19%ofSafaricomairtimepurchasesareconductedthroughM‐PESA.   7 Seewww.safaricom.co.ke/fileadmin/template/main/images/MiscUploads/M‐PESA%20Statistics.pdfforkey monthlystatisticsforM‐PESA.AdditionalfiguresaretakenfromSafaricom’spublishedhalf‐yearresultsforthe periodendingSeptember2009andCentralBankofKenyareports. 8 The2009FinAccesssurvey(FSDT[2009a],p.16)confirmedthat40%ofadultshadusedM‐PESA.  4  Thereare27companiesusingM‐PESAforbulkdistribution ofpay ments.Safaricomitselfusedit todistributedividendsonSafaricomstockto180,000individualshareholderswhooptedto receivetheirdividends intotheirM‐PESAaccounts,outofatotalof700,000shareholders.  Sincethelaunchofthe billpayfunctioninMarch2009,thereare75companiesusingM‐PESAto collectpaymentsfromtheircustomers.Thebiggestuseristheelectricutilitycompany,which nowhasroughly20%oftheironemillioncustomerspayingthroughM‐PESA.  Atleasttwobanks(FamilyBankandKenya CommercialBank)areusingM‐PESAasamechanism forcustomerstoeitherrepayloansorwithdrawfundsfromtheirbanksaccounts.  CustomerPerspectivesonMPESA 9  Asurveyof3,000M‐PESAusersandnon‐usersconductedinthefallof2008shedconsiderablelighton theprofileofM‐PESA’searlyadoptersandcustomerusagepatterns.Thesurveyfoundthattheaverage M‐PESAuseris,incomparisontonon‐users,twiceaslikelytohave abankaccount(72percentversus36 percent),wealthier(65percenthigherexpenditurelevels),moreliterate,andbettereducated.Early adoptersappeartobeexperiencedwithbankingpropositionsandfairly“techsavvy,”whichprobably makesthemmoreacutelyawareoftheconvenienceofferedbyM‐PESA relativetothealternatives. Exhibit3highlightshowcustomersusetheservice.Consistentwithitsbroadmarketpositioning,more thanhalfthesampleuseitprimarilyforsendingandreceivingmoney.Interestingly,21percentofM‐ PESAusersreportusingM‐PESAforstoringmoney.However,thesurveyrevealedthatlessthan1 percentof accountshadbalancesofoverKSh1,000(US$13),andagovernmentauditofM‐PESAin August2009revealedthattheaveragebalanceonM‐PESAaccountswasonlyUS$2.70. 10 Thesurvey alsofoundthat52percentofcustomersusetheserviceonamonthlybasis,suggestingthatcustomers haveyettoincorporateM‐PESAintotheirdailylives. Exhibit3:TheUsesofM‐PESA     9 ThedataandtablesfromthissectionarefromSuri,TavneetandWilliamJack(June2008),“Theperformanceand ImpactofM‐PESA:PreliminaryEvidencefromaHouseholdSurvey.”UnpublishedPaper 10 Okoth,Jackson(2009).“RegulatorgivesM‐PESAacleanbillofhealth.”TheStandard,27January2009.  5 Thesurveyalsofoundthat98percentofusersreportbeinghappywiththeserviceand84percentclai m thatlosingM‐PESAwouldhavealarge,negativeeffectonthem.Exhibit4belowillustrateshow customerscompareM‐PESAwithalternativeservices. Exhibit4:ComparingM‐PESAwiththeAlternatives    MPESA’sServiceEvolution M‐PESA’soriginalcoreofferingwastheP2Ppayment–enablingcustomerstosendmoneytoanyone withaccesstoamobilephone.Itopenedupamarketfortransactionswhichpreviouslywerehandled largelyinformally–throughpersonaltrips,friends,andpublictransportnetworks.Thatisrepresented bytheset oftransactionslabeled‘personalnetworks’inthemiddleofExhibit5below.Many P2P transactionscanbecharacterizedasscheduledpayments(suchassendingaportionofsalaryearnedat theendofthemonthtor elativesbackhome),butmanyrepresentabasicformoffinance,where peoplecan drawonamuchbroadernetworkoffamilymembers,friends,andbusinessassociatesto accessmoneyasandwhenrequired.Thus,M‐PESAnotonlyintroducesalargemeasureofconvenience totransactionsthatwerealreadyoccur r ing,butitalsoenablesabasicformoffinancialprotectionfora largenumber ofusersbyenablinganetworkforinstant,‘ondemand’payments. Inrecentmonths,SafaricomhasincreasinglyopenedupM‐PESAtoinstitutionalpayments–enabling companiestopaysalariesandcollectbillpayments.Infuture,SafaricomenvisionsincreaseduseofM‐ PESAforin‐storepurchases.Thus,Safaricomintends forM‐PESAtobecomeamorepervasiveretail paymentsplatform,astrategyrepresentedbythedownwardarrowinExhibit5.   6 Exhibit5:PotentialRangeofTransactionsSupportedbyM‐PESA   ThechallengeremainsforM‐PESAtobecomeavehiclefordeliveryofabroaderrangeoffinancial servicestothebulkoftheKenyanpopulation–representedbytheupwardarrowinExhibit5.Sofar,the evidenceislimitedthatpeoplearewillingtousethebasicM‐ PESAaccountitselfasastoreofvalue. Thereislikelytobeaneedtodevelopmoretargetedsavingsproductsthatbalancecustomers’ preferenceforliquidityandcommitment,andwhichconnectintoabroaderrangeoffinancial institutions.ThisisthejourneyM‐PESA mustbeonforitto deliveronitspromiseofaddressingthe challengeoffinancialinclusioninKenya.Akeypreconditionisregulation:theCentralBankofKenyaisin theprocessoffinalizingregulationsthatwillallownon‐bankoutletsandplatformssuchasM‐PESAasa channelforformaldeposit‐taking.Beyond that,Safaricomwillneedtodevelopappropriateservice, commercialandtechnicalmodelsforM‐PESAtointerworkwiththesystemsofotherfinancialservice providers.Wereturntothistopicintheconcludingsectionofthispaper.  ThebroadersignificanceofMPESA BeforeexaminingwhyM‐PESAachievedsuchdramaticgrowth,wediscussbrieflythreetop‐linelessons thathaveemergedfromM‐PESA’ssuccess: First,M‐PESAhasdemonstratedthepromiseofleveragingmobiletechnologytoextendfinancial servicestolargesegmentsofunbankedpoorpeople.Thisisfundamentallybecausethemobile phone isquicklybecomingaubiquitouslydeployedtechnology,evenamongpoorsegmentsofthepopulation. MobilepenetrationinAfricahasincreasedfrom3percentin2002to48percenttoday,andisexpected FORMAL FINANCIAL PRODUCTS Savings, credit, insurance INFORMAL SERVICE PROVIDERS Pawnbroker,moneylender ‘On-demand’ payments PERSONAL NETWORKS ‘Scheduled’ payments REMOTE B2C/C2B INSTITUTIONAL PAYMENTS Salaries, bill pay, G2P, online/e-commerce IN-STORE MERCHANT PAYMENTS For goods & services ‘JUST PAYMENTS’ PUSHING & PULLING MONEY ACROSS TIME M-PESA role in promoting fuller financial inclusion? M-PESA as a fuller retail payments platform  7 toreach72percentby2014. 11 And,happily,themobiledevicemimicssomeofthekeyingredients neededtoofferbankingservices.TheSIMcardinsideGSMphonescanbeusedtoauthenticateusers, therebyavoidingthecostlyexer ciseofdistributingseparatebankcardstolow‐profitabilitypoor customers.Themobilephonecanalsobeused asapointofsale(POS)terminaltoinitiatefinancial transactionsandsecurelycommunicatewiththeappropriateservertorequesttransaction authorization,thusobviatingtheneedtodeploycostlydedicateddevicesinretailenvironments. Second,M‐PESAhasdemonstratedtheimportanceofdesigningusage‐rathe rthanfloat‐based revenuemodels forreachingpoorcustomerswithfinancialservices.Becausebanksmakemostoftheir moneybycollectingandreinvestingdeposits,theytendtodistinguishbe tweenprofitableand unprofitablecustomersbasedonthelikelysizeoftheiraccountbal ancesandtheirabilitytoabsorb credit.Banksthusfinditdifficulttoservepoor customersbecausetherevenuefromreinvestingsmall‐ valuedepositsisunlikelytooffsetthecostofservingthesecustomers.Incontrast,mobileoperatorsin developingcountrieshavedevelopedausage‐basedrevenuemod el, sellingprepaidairtimetopoor customersinsmallincrements,suchthateachtransactionisprofitableona stand‐alonebasis.Thisisthe magicbehindtherapidpenetrationofprepaidairtimeintolow‐incomemarkets:acardboughtisprofit booked,regardlessofwhoboughttheprepaidcard.Thisusage‐basedrevenuemodelisdirectlyaligned withthemodelneededtosustainablyoffersmall‐valuecash‐in/cash‐out transactionsatretailoutlets andwouldmakepossibleatruemass‐marketapproach,withnoincentiveforproviderstodenyservice basedonminimumbalancesorintensityofuse. Third,M‐PESAhasdemonstratedtheimportanceofbuildingalow‐costtransactionalplatformwhich enablescustomerstomeetabroad rangeoftheirpaymentneeds.Onceacustomerisconnectedtoan e‐paymentsystem,shecanusethiscapability tostoremoneyinasavingsaccount,sendandreceive moneyfromfriendsandfamily,paybillsandmonthlyinsurancepremiums,receivepensionorsocial welfarepayments,orreceiveloandisbursements andrepaythemelectronically.Inshort,whena customerisconnectedtoane‐paymentsystem,herrangeoffinancialpossibilitiesexpandsdramatically. Puttingtheseelementstogether,M‐PESAhaspromptedarethinkontheoptimalsequencingoffinancial inclusionstrategies.Wheremostfinancialinclusionmodelshaveemployed“credit‐led” or“savings‐led” approaches,theM‐PESAexperiencesuggeststhattheremaybeathirdapproach–focusfirston buildingthepayment“rails”onwhichabroadersetoffinancialservicescanride. AccountingforMPESA’sSuccess:ThreePerspectives TherestofthispaperexploresM‐PESA’ssuccessfromthreeangles. First,weexaminetheenvironmental factorsinKenyathatsetthesceneforasuccessfulmobilemoney development.Then,weexaminethe servicedesignfeaturesthatfacilitatedtherapidado ptionandfrequentuse ofM‐PESA.And,finally,we  examinetheelementsinSafaricom’sexecutionstrategythathelpedM‐PESArapidlyrea chacriticalmass ofcustomers.   11 WirelessIntelligence(www.wirelessintelligence.com)  8 Insodoing,wedrawextensivelyonasequenceoffourpaperswhichreaderscanrefertoformore detailedaccountsoftheM‐PESAstory:HeyerandMas(2009)onthecountryfactorsthatledtoM‐ PESA’ssuccess,MasandMorawczynski(2009)onM‐PESA’sservicefeatures,Masand Ng’weno(2010) onSafaricom’sexecution,andMas(2009)ontheeconomicsunderpinningbranchless bankingsystems. Beyondthecompellingmarketing,coldbusinesslogicandconsistentexecutionofM‐PESA,itssuccessis avividexampleofhowgreatthingshappenwhenagroupofleadersfromdifferentorganizationsrally aroundcommon challengesandideas.ThestoryofM‐PESAstraddlesthesocialandthecommercial,the publicandtheprivate,powerfulorganizationsanddeterminedindividuals: TheIndividualsandInstitutionsBehindM‐PESA TheideaofM‐PESAwasoriginallyconceivedbyaLondon‐basedteamwithinVodafone,ledbyNick HughesandSusieLonie.Thisteambelievedthemobilephonecouldplayacentralroleinloweringthe costofpoorpeopletoaccessfinancialservices.TheideawasseizedbytheSafa ricomteaminKenya,led byCEOMichaelJosephandProductManagerPaulineVaughn.Theytoyedwiththeidea,convinced themselvesofitspower,developeditthoroughlypriortothenationallaunch,andoversawa very focusedexecution. TheCentralBankofKenya(CBK),andinparticularitsPaymentsSys temgroupledbyGeraldNyoma, deservesmuchcreditforbeingopentotheideaoflettingamobileoperatortaketheleadinproviding paymentservicestothebulkofthepopulation.TheCBKhadrecentlybeenmadeawareoftheverylow levelsofbankpenetrationinthecountrybythefirstFinAccess surveyin2006,andtheywere determinedtoexploreallreasonableoptionsforcorrectingtheaccessimbalance.TheCBKworkedin closepartnershipwithVodafoneandSafaricomtoassesstheopportunitiesandrisksinvolvedpriorto thelaunchandasthesystemdeveloped.Theywereconsciousthatprematureregulationmightstifle innovation,sotheychosetomonitorcloselyandlearn–andformalizetheregulations later.  Finally,theUK’sDepartmentforInternationalDevelopment(DfID)playedan instrumentalrole,firstby fundingtheorganizationsthatmadetheFinAccesssurveypossible—theFinancialSectorDeepening TrustinKenya,theFinMarkTrustinSouthAfrica—,andthenbyprovidingseedfundingtoVodafoneto trialitsearliestexperimentswithM‐PESA.DfID’sroleinspotlightingtheneedformobilepaymentsand fundingtheearlyriskdemonstratesgoodrolesfordonorfunding.  2. KenyaCountryFactors:UnmetNeeds,FavorableMarketConditions ThegrowthofM‐PESAisatestamenttoSafaricom’svisionandexecutioncapacity.However,Safaricom alsobenefitedfromlaunchingtheserviceinacountrywhichcontainedseveralenablingconditions fora successfulmobilemoneydeployment,including:stronglatentdemandfordomesticremittances,poor qualityofavailablefinancialservices,abanking regulatorwhichpermittedSafaricomtoexperimentwith differentbusinessmodelsanddistributi onchannels,andamobilecommunicationsmarket characterizedbySafaricom’sdominantmarketpositionandlow commissionsonairtimesales.  9 StrongLatentDemandforDomesticRemittances SafaricombasedtheinitiallaunchoftheM‐PESAserviceonthe‘sendmoneyhome’proposition,even thoughitalsoallowstheusertobuyandsendairtime,storevalueand,morerecently,topaybills. Demandfordomesticremittanceserviceswillbelargerwheremigrationresultsinsplittingof families, withthebread‐winnerheadingtourbancentersandtherestofthefamilystayingbackhome.Thisisthe caseinKenya,where17percentofhouseholds dependonremittancesastheirprimaryincomesource. 12   InherstudyofM‐PESA,Ratan(2008)suggeststhatthelatentdemandfordomesticremittancesis relatedtourbanizationratios.Morepropitiousmarketswillbethosewheretheprocessofrural‐urban migrationissufficientlyrootedtoproducelargemigrationflows,butnotsoadvancedthatrural communitiesare hollowedout.Countrieswithmid‐rangeurbanizationratios(20percentto40percent), especiallythosethatareurbanizingatarapidrate,arelikelytoexhibitstrongrural‐urbantiesrequiring transferofvaluebetweenthem.ThisisthecaseinmanyAfricancountrieslikeKenyaandTanzania, wherethe urbanizationratiosare22percentand25percent,respectively. 13 InthePhilippinesandLatin America,whereurbanizationratiosexceed50percent,remittancesaremorelikelytobetriggeredby internationalratherthandomesticmigrationpatterns.  Whereentirenuclearfamiliesmove,remittanceswillbestrongerwherethereisculturalpressureto retainconnectionwithone’sancestralvillage.InKenya,migrants’ties withruralhomesarereinforced byanethnic(ratherthannational)conceptionofcitizenship.Theselinksareexpressedthroughburial, inheritance,cross‐generational,socialinsuranceandotherties,evenincaseswheremigrantsreside moreorlesspermanentlyincities. 14 Inothersettings,a greateremphasisonnationalasopposedto localorethnicidentitymayhavediminishedthesignificanceoftherural‘home’andhencedampened domesticremittanceflows. PoorQualityofExistingAlternatives Latentdemandfore‐paymentsmustbelookedatinthecontextoftheaccessibilityandqualityofthe alternatives.Iftherearemanygoodalternativestomobilepayments(asistypicallythecasein developedcountries),itwillbedifficulttoconvinceuserstoswitchtothenewservice.In thePhilippines, forexample,theG‐CashandSmartMoneymobilepaymentservicesexperiencedlowtake‐upinpart duetotheavailabilityofacompetitivealternativetomobilepayments–anextensiveandefficientsemi‐ formalretailnetworkofpawnshopswhichoffereddomesticremittanceservicesat3perce nt.  In Kenya,themostcommonchannelforsendingmoneybeforeM‐PESAwasinformalbusandmatatu (sharedtaxi)companies.Thesecompaniesarenotlicensedtotransfermoney,r esultinginconsiderable riskthatthemoneywillnotreachitsfinaldestination.AndKenyaPost,Kenya’smajorformalremittance   12 FSD‐Kenya(2006) 13 CIAWorldFactBook(https://www.cia.gov/library/publications/the‐world‐factbook) 14 ForfulleranalysesoftheuseofmobilemoneyfordomesticremittancesinKenya,seeRatan(2008)and Morawczynski(2008).  10 provider,isperceivedbycustomersascostly,slow,andpronetoliquidityshortagesatruraloutlets. Meanwhile,Kenya’ssparsebankbranchinfrastructure(840branches)isfartoolimitedtocompetewith M‐PESA’s16,900cash‐in/cash‐outoutlets.Exhibit6belowillustrateshowKenyanhouseholdssent moneybeforeandafterM ‐PESA.Notethedramaticreductionintheuseofinformalbussystemsand KenyaPosttotransfermoneybetween2006and2009.  Exhibit6:MoneyTransferBehaviorBeforeandAfterM‐PESA 15   Asnotedabove,M‐PESA’searlyadopterswereprimarilybankedcustomers,whichsuggeststhatM‐PESA didnotacquireitsinitialcriticalmassthroughcompetitionwiththeformalsectorbutratherasa complementtoformalservicesforclientswhowerewealthier,moreexposedtoformalfinancialservice options,and lessrisk‐averse.Asservicesmovedeeperintothemarket,unbankeduserswilllikelydrive M‐PESA’sexpansion,duetothecompetitiveadvantagesofformalmobileoffersoverotheroptions.This isonereasonwhyAfrica,withitshighpopulationofunbanked,isseenassuchapromisingmarketfor mobilemoneydeployments. ASupportiveBankingRegulator Regulationofmobilemoneycanhelptosecuretrustinnewmobilemoneyschemes.Atthesametime, regulationmayconstrainthesuccessofamobilemoneydeploymentbylimitingtheschemeoperator’s degreesoffreedominstructuringthebusinessmodel,serviceproposition,anddistributionchannels.In thecaseofM ‐PESA,SafaricomhadagoodworkingrelationshipwiththeCentralBankofKenya(CBK) andwasgivenregulatoryspacetodesignM‐PESAinamannerthatfititsmarket.  TheCBKandSafaricomworkedoutamodelthatpro videdsufficientprudentialcomforttotheCBK.The CBKinsistedthat allcustomerfundsbedeposited inaregulatedfinancialinstitution,andreviewedthe   15 FSD‐Kenya(2006)andFSD‐Kenya(2009).