Kenya leads the continent in mobile banking penetration. Its success was due to a dominant mobile operator, the high mobile phone penetration vs. low banking penetration, a large low-income rural population and a cash-based economy.
Safaricom’s Mobile money service M-PESA, launched in 2007, accounted for 80 percent of Kenya’s mobile payment transactions value by 2017, realizing the bulk of revenue.
Nonetheless, M-PESA’s success had a limited disruptive effect on the banking system, since banks have not been actively involved in payment transactions in rural areas.
In contrast, mobile payment success expanded the banking market and led to growth opportunities for banks by bypassing rural banking constraints and providing access to a large portion of the lower-income rural population.
It benefited banks by: (1) lifting their participation in mobile payments, (2) increasing cash payments flowing through formal channels, thereby encouraging financial inclusion and providing financial access for 82 percent of the population, (3) improving efficiency as banks emulate mobile and agent network success and adopt innovative digital technology; and (4) promoting deposit growth because cash held in mobile wallets flows back to the banks as custody accounts.
Kenyan mobile banking volumes continue to grow strongly, with mobile commerce now leading peer-to-peer transactions.
Banks have increasing transactions through digital platforms, including loans, and we expect digitization to continue to fuel Kenyan banks’ growth and support their efficiency