MPESA is a BANK!

MPESA has grown at a phenomenal rate in Kenya, with close to 14M customers and nearly 40,000 agents. M-PESA is closer to Kenyans than any bank.  Only 20% of the bankable population in Kenya is formally banked.  Mainly due to low incomes, and the high cost of banking. Another factor is the poor infrastructure and distance from bank branch, plus numerous and lengthy procedures associated with account opening.

With mobile set to become the dominant channel in digital banking, customer demand is placing growing pressure on banks to deliver advanced and engaging services through mobile platforms. Banks however have not caught on to the enormous benefits that come with a clearly defined mobile strategy responsive enough to the rapidly changing industry.

The success of M-PESA however is not only from the deployment of an efficient and wide agent network, but from its simplicity; Innovative and customer-centric solutions. They think like customers. What do customers want? What do they need?

The customer demand for MPESA service leaves banks with no choice but to plug M-PESA onto their m-banking menus. The cost of convenience to the customer outweighs any double charge the customer incurs. Money is consistently moving out of the banks ecosystem into M-PESA and whoever is lucky enough to bank them.

However in my opinion, the banks are educating customers for when M-PESA officially gets a banking license. Put two and two together. If my bank has allowed me to move money into my M-PESA, officially they indicate that they have endorsed the service and hence trust it, hence its good enough for the end user. In a customer’s mind, that’s as good as any place to store your money. Recent surveys suggest that 26% of M-PESA customers use the service to save .Once M-PESA figures out how to take on deposits and acquire a banking license, guess who’ll lose?

Japan’s Jibun Bank is a case in point. It was created in 2008 as a joint venture between the country’s largest bank, BTMU and KDDI, a telecommunications operator. Designed from the outset as a mobile-only bank without a branch network, within two years it had more than one million accounts and US$1.7bn in deposits. Yes people, a MOBILE ONLY Bank is possible.

As the adoption of smartphones continues and speed of access improves, customers across every age group are becoming increasingly comfortable with conducting more and increasingly complex transactions through their mobile phones. By 2013, PayPal expects its mobile payment volumes to total US$7.5bn. Smartphones are proving the key enabler of mobile banking, in developed markets.

Banks traditionally make money from lending, so I suppose they will read this and think hey, that’s no skin off our back.  But if they lose deposits, guess what’s next? Lending. And guess who has figured out how to make money profitably from lending small amounts i.e airtime….

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