M-Pesa

What Is M-Pesa?

M-Pesa is a mobile banking service that permits users to store and transfer money through their mobile telephones. M-Pesa was presented in Kenya as an alternative way for the population of the country to approach financial services. Safaricom, the largest mobile telephone operator in Kenya, sent off M-Pesa in 2007. The service is a blend of two substances where M means mobile and Pesa means money or payment in the Swahili language.

One of the drives for Fintech innovations, similar to M-Pesa, is financial inclusion, which is mostly geared toward a underbanked or unbanked group of individuals. Financial inclusion is an initiative that looks to incorporate residents who have no access to banks or who can't bear the cost of the required minimum deposits in the digital banking time. For this initiative to succeed, various sectors must team up in sharing data with one another and build a meaningful digital platform.

This cross-communication tactic utilized by M-Pesa is developing rapidly in sub-Saharan Africa, where the telecommunication and banking sectors are working together to make mobile banking services for those with limited access to traditional banking.

Understanding M-Pesa

M-Pesa is a virtual banking system that provides transaction services through a SIM card. When the SIM has been embedded into the card opening of the mobile gadget, users can make payments and transfer money to merchants and family members with SMS messages.

Users with no bank accounts can access the numerous M-Pesa outlets distributed across the country. The money that should be stored is given to the kiosk orderly, who transfers the amount in digital form to the client's M-Pesa's account.

Cash collected from M-Pesa is deposited in bank accounts held by Safaricom. The bank accounts act as normal checking accounts and are insured up to a maximum of 100,000 shillings (or $1000) by the Deposit Protection Fund.

M-Pesa provides receipts as proof of transaction. For a transaction to occur, the two players need to exchange each other's telephone numbers on the grounds that the telephone numbers act as account numbers. After settlement, the two players receive a SMS warning with the full name of the counterparty and the amount of funds deposited or removed from the client's account. The mobile receipt, which is received in no time, assists with promoting transparency for all individuals associated with a transaction.

An Example of M-Pesa

A farmer has no bank account and needs to deposit his commodity sale proceeds of 1,000 shillings goes to a M-Pesa outlet and deposits the money with the kiosk agent or specialist. The agent, thusly, utilizes her telephone to access the client's account with the client's registered telephone number and credit the account for 1,000 shillings.

The farmer gets a SMS warning on his cellphone not long after the deposit, confirming how much was deposited and what his current account balance holds. The farmer can likewise effectively pull out cash from his account by utilizing the M-Pesa chaperon's or alternately agent's number provided at the power source and a personal PIN.

Special Considerations

Through mobile payment services like M-Pesa, the standard of living in Kenya has improved significantly. Market traders, debt gatherers, farmers, and taxi drivers don't have to carry around or transact in a large amount of cash. This means that the occurrence of theft, burglary, and fraud is decreased. Likewise, individuals and business owners don't need to trust that hours will make their power and water bill payments on the grounds that these can be made utilizing M-Pesa.

Involving M-Pesa permits small business owners in remote and rural areas to conduct financial transactions securely and effectively through their mobile telephones.

To combat fraud, Safaricom mandates that users of a Safaricom SIM card who need to register for M-Pesa need to do as such with a valid government ID, for example, the Kenyan national identification card or a visa. Along these lines, every transaction is marked with the identification of the party transferring, paying, depositing, or pulling out money from an account.

Mobile money is progressively being adopted in developing nations where a high percentage of the population has practically zero access to traditional banking. Progressive services like Paga, MTN Mobile Money, Airtel Money, and Orange Money are upsetting the traditional payment systems utilized habitually by residents of emerging nations, by changing the economy from a cash society to a digital one.

Highlights

• M-Pesa is one of the imaginative apparatuses that have been birthed from the joint effort of telecommunication and banking sectors in East Africa.
• M-Pesa makes it workable for unbanked individuals to pay for and receive goods and services utilizing a mobile telephone as opposed to using a brick-and-mortar bank.
• Emergent technology in the financial sector, or Fintech, has made it feasible for financial services and products, similar to M-Pesa, to be more accessible at small costs.
• M-Pesa started in Kenya and is being used in 10 countries, including India and Romania.