Safaricom is the biggest telecom operator in Kenya. In 2007, it decided to use its telecom infrastructure to build M-Pesa, a simple mobile money transfer system. It tapped into the proven demand for mobile payments from millions of Kenyans with a mobile phone.
Existing financial services were expensive and inappropriate for small transactions. In 2009, there were only 352 ATMs and 491 bank branches in the entire country (with a population of 39 million). Most money transfers were in cash, which was expensive, unreliable, and sometimes dangerous.
M-Pesa changed that. Within two years of its introduction, M-Pesa saw 10,000 new registrant applications daily.6 In 2010, it processed over 90% of all mobile money transactions in Kenya, and had a 70% mar- ket share of all mobile money subscribers.
M-Pesa also had an impact on a national scale in Kenya with studies crediting M-Pesa for lifting an estimated 2% of Kenyan households out of extreme poverty.
1. Identify a proven demand you may unlock based on your resources
Safaricom has evidence for market demand: some of their mobile customers hack their own digital payment solution by using SMS messages to share mobile airtime as a means of e-currency.
2. Repurpose your key resources to enable the new value proposition
In 2007, Safaricom imagines how it could repurpose its telecom network to create a reliable money transfer solution with M-Pesa. As the dominant telecom operator in Kenya, it already has a relationship with millions of Kenyans.
3. Differentiate from competition
In the mid-2000s, financial services are expensive and do not cater to irregular and small transactions. Only a minority of Kenyans are using the banking system. With M-Pesa’s affordable money transfers, Safaricom opens up the financial system to the previously unbanked.
4. Enjoy the new revenue stream
M-Pesa generates a new revenue stream for Safaricom reaching Sh62.9 billion ($625 million equivalent), that is, 28% of Safaricom total revenues in 2018.9 Revenues come from small transaction fees on money transfers and other financial services.
+ Network of agents
Through 2018, M-Pesa builds a distribution network of 110,000 agents across Kenya, allowing Kenyans to exchange cash for virtual currency and vice versa.10 This includes small shops, gas stations, post offices, and even traditional bank branches and is 40 times the number of bank ATMs in Kenya.
