Why Doesn’t Every Business In Kenya Have A Mobile Money Account?

Ignacio Mas and Amolo Ngw’eno carried out a research project commissioned by FSD Kenya to understand the business use of M-PESA. iHub Research attended the event where the findings of the research were presented. Below is a summary of the event.

An underlying assumption that the researchers were looking to understand was, “if every business was connected to a mobile payment system, what would be the impact to the economy?”.

Some motivating factors that could push the mobile money ecosystem are as follows:

a) Social uses- people helping each other;

b) Financial Inclusion- people accessing financial services creating financial products (financial products are a pattern of transactions over time);

c) Business Uses- businesses being more efficient, entrepreneurship unleashed, having larger businesses serving the base of the pyramid, faster enterprise growth resulting in more job creation.

The researchers surveyed 75 businesses in Nairobi, Kisumu, Limuru, and Nakuru. They did not interview any banks or microfinance institutions, but instead focused on the small businesses like supermarkets, the juakali sector.

Major Findings:

It was reported that most businesses viewed M-PESA as a direct alternative to cash. A majority of the businesses still used cheques. RTGS (Real Time Gross Settlement) was a limitation because it required a transaction of over 1million KES to use. Large businesses preferred paying with cheques and the small businesses with cash. Cheques were preferred overall because they made it easier to track the status of payments. Most employees were paid through bank transfers.

M-PESA was found to be useful to taxi cabs and late night bars; utilities and schools, for making emergency and unplanned payments; online retailers and large retailers; as well as local distributers to minimize the cash carried in trunks.

Limitations of M-PESA:

a) M-PESA lacks IT integration and a business is required to import the transactions in Excel, which is limiting and not very secure;

b) Instant payment notification is not seen as sufficiently reliable;

c) Cumbersome bank settlements – it takes about 4 days to clear the money from corporate M-PESA (mobile wallet) to the bank account;

d) M-PESA is not sufficiently flexible/automated. The process is largely manual.

Given the challenges stated, businesses also complained that they had numerous other challenges that made it difficult to implement it in a business setting:

a) People reporting false payment resulting in a reversal of transaction after making purchases;

b) Customers sending fake SMS pretending they are legitimate transactions;

c) When customers make payment through M-PESA instead of cash, the number of fraudsters increased who areable to gain access to the business phone number.

Developers have the opportunity to develop software solutions that could fill the gap where M-PESA and similar mobile payment solutions have failed to bridge the gap in order to encourage more businesses to deploy the use of mobile money accounts. Some of the gaps that are opportunities for developers to solve include:

a) Businesses could avoid payment to wrong numbers using a system that could support incorporating cheque digits when making a payment through mobile money;

b) A follow-up system for paper receipts for clients when they make a payment using mobile money;

c) More applications that enable easy sweeping of funds between mobile money and bank accounts;

d) Integrated pay and receive functionality that could reduce the dispute resolution process in the cases of reversal of payments.

The full research document from can be found in the FSD Insights issue 04 -2012 on their website (http://www.fsdkenya.org).