M-Pesa Versus UPI - The Quest For Financial Inclusion in Kenya Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

M-Pesa Versus UPI - The Quest For Financial Inclusion in Kenya Case Study Solution

When it comes to achieving financial inclusion, there are a variety of factors to consider. One of these is whether you will be using an M-Pesa or UPI to make payments. Both of these services have their advantages and disadvantages, but you should know which is right for you. You should also have a clear picture of the financial implications before making any decision.

Case Study Solution

There has been an increase in the number of micro-accounts and mobile wallets in Kenya. This growth has occurred due to market dynamics. As such, it is not possible to track the exact date when the first mobile wallets were created. However, it seems that the growth began in 2007. In 2009, micro-accounts reached 8 million. The number increased to 15 million in 2010 and over 20 million in 2012.

M-Pesa is a technological platform that has allowed Kenyan banks to grow. It has also provided the financial system with a mechanism to manage small value accounts, and offered technology for irregular flows. These systems have helped Kenyan banks to expand their offerings, and supported the development of virtual credit supply and banking services.

M-Pesa has evolved from a mobile money service to an ecosystem. It now has a super app that allows users to do travel, health, and agriculture transactions. Additionally, its lending and payments capabilities are expanding, and its customer base has grown. With over 10 million monthly active users, the super app has already begun to integrate mini apps into e-commerce.

While telecoms do not face the same regulatory barriers that banks do when developing new business models, they have developed their own trust and credibility, and can be more easily trusted by consumers. Telecoms are also able to assess the credit worthiness of customers and extend small-scale loans.

Porters Five Forces

The most successful digital payment systems are often ones with dissimilar corporate structures, agent networks and operating models. One such system is M-Pesa, a mobile phone-based financial service launched by Kenyan mobile network operator (MNO) Safaricom. This low-cost transaction platform is designed to attract financially excluded customers.

As an analyst at the World Bank, Abebi Eke was asked to compare two of the more promising payment systems. Specifically, he was asked to determine which was better. What he found was that while both systems have their merits, the UPI (Unified Payments Interface) is the more practical, and more useful, of the two.

For one, the UPI is designed to improve interoperability between bank accounts. It also helps reduce the costs associated with currency printing and lowers transaction costs within the economy. On the other hand, the M-Pesa system is based on a standardized, low-cost transaction platform and leverages mobile technology. These features allow it to serve as an important stepping stone to a formal financial system. However, it is also plagued by numerous shortcomings including the need for money to be transferred from a bank account and predatory lending.

Although it is not a panacea, it is a promising way to include the unbanked population in the formal financial net. A new business model is needed to cater to this segment of the market. Another notable factor is the fact that the telecommunications industry in Niali has a strong trust advantage over the banking sector. In addition, telecoms have already built trust with consumers through prepaid phone services. They also have a plethora of data on their customer's phone usage. Moreover, they have the flexibility to offer financial products.

PESTLE Analysis

The PESTEL (Pestle to Eke) acronym stands for political, economic, social, and technological factors. A PESTLE analysis is a great way to make sense of all of the above and to see how they affect one another.

In a nutshell, the M-Pesa is a mobile phone-based financial service aimed at the unbanked and underserved. Its most notable feature is the use of National ID (Niali) information for opening new accounts. Also a plus is the fact that the service operates in both urban and rural areas. As an example, it has a presence in Malwi, a small country in the Great Lakes region of Kenya.

M-Pesa was lauded for its ability to deliver micro-loans to its customers. It was also the only mobile financial service to offer a branded version of the ubiquitous credit card. One of its most prominent competitors is Safaricom, which has a monopoly on the payments market courtesy of its dominant infrastructure.

The M-Pesa is a well-executed model, but it is not without its flaws. In addition to poor customer service and lack of transparency, M-Pesa has not been properly regulated by the Kenyan authorities. Nonetheless, it has won the hearts of millions of unbanked Kenyans who have saved with it. And it is still the most popular financial services brand in the country. Despite these challenges, the M-Pesa is worth the wait.

Financial Analysis

M-Pesa has certainly made waves in the financial world. The aforementioned'super app' was launched in 2021 and boasts over a million monthly active users. And as far as the numbers go, M-Pesa is one of the few providers charging for P2P payments. Similarly, it has been estimated that its largest customer, Safaricom, is responsible for nearly half of the country's credit card transactions.

M-Pesa has also helped spawn a host of fintech startups. One such company, Wave, is aimed at Francophone West Africa. It recently received a regional e-money license. Another fintech pioneer, OVO, purchased a P2P lending license in the hope of outdoing its rivals.

M-Pesa's most impressive feats include the fact that it has a network of over 3500 agents in more than 60 cities. This has allowed the company to expand its reach and offer a suite of products. From mobile banking to micro savings accounts, the company has reimagined the traditional customer experience. Interestingly, the company has also been able to woo commercial banks to the fold by offering the ability to open and maintain micro accounts. Moreover, it's mobile money services have been augmented with an array of ancillary services such as insurance, investment, and remittances.

Overall, M-Pesa has certainly helped transform the Kenyan banking industry. As a result, many banks have invested heavily in the M-Pesa platform. These investments have been rewarded with a slew of innovative and useful financial products, such as mobile airtime, savings, credit and loan products, and digital payments solutions.

Recommendations

The UN has highlighted financial inclusion as a key determinant of economic growth, and a key enabler of the Sustainable Development Goals. As such, governments are developing national strategies to address the growing unbanked population and increase financial inclusion. Financial inclusion is a structural opportunity for businesses and investors alike. It supports better economic outcomes, including increased economic growth and gender equality. Increasing financial inclusion will reduce poverty and contribute to greater shared global economic prosperity.

Emerging countries, particularly in Africa, Asia, and Latin America, have a larger unbanked population. Most of the unbanked population in these regions lives on a modest income. Traditional banking systems often do not serve the needs of small and medium-sized enterprises, or SME. This presents a large market for fintech disrupters. SMEs represent up to 40% of GDP in emerging markets.

A new payment infrastructure is needed to meet the needs of the unbanked. The Unified Payment Interface (UPI) could be a suitable option. While UPI is a relatively recent development, it has already reached 260 million users.

As well, it has built a network of 300 registered banks. This includes several banks that are operating as micro-finance institutions, allowing them to extend loans to SMEs. Unlike traditional banking, however, UPI allows money transfers between bank accounts without a transaction fee. Eventually, UPI will gradually encourage cashless payments.

M-Pesa, meanwhile, has transformed the Kenyan banking system. In addition to offering mobile money services, the system has also developed into an ecosystem, providing technology for managing irregular flows and generating credit scores.

M-Pesa Versus UPI – The Quest For Financial Inclusion in Kenya Case Study Solution

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