Business, Creative, Development, Ecommerce, General, Tech
Reading Time: 4 minutes

Financial Inclusion Through Payment Innovation: A Case Study of M-Pesa

The transformative power of financial technology and payment innovation has opened up great pathways to financial inclusion, changing how people manage and access their money.

A notable case that has illuminated the path to greater financial inclusion is M-Pesa, the mobile-based financial service that enables users to carry out important financial operations with just their mobile phones.

M-Pesa has shown the transformative potential of a great payment innovation in driving development, reducing poverty, and creating more inclusive financial systems. This article discusses how mobile money and similar payment innovations can promote financial inclusion, taking M-Pesa as a case study.

What is M-Pesa?

M-Pesa is a mobile-based financial service that allows users to store and transfer money through their mobile phones without the need for a formal bank account. It was launched in 2007 by Safaricom, a leading mobile network operator in Kenya.

The success of M-Pesa since its launch has been tremendous, as it has become one of the most successful mobile money transfer services in the world. M-Pesa has over 56.7 million subscribers and is available in seven countries: Kenya, Tanzania, Egypt, Mozambique, DR Congo, Lesotho, and Ghana.

How Does M-Pesa Work?

M-Pesa has a simple model; it doesn’t complicate things. To use M-Pesa, a user must register an account with Safaricom and fund it by purchasing credits from a retail outlet or an authorized reseller. M-Pesa requires users to enter their personal identification number (PIN) to transfer money to another. To withdraw cash, they can visit a retail outlet or an M-Pesa authorized reseller to make transfers and receive cash.

M-Pesa is a robust payment system, as it enables users to carry out various financial services, from bill payments to transfers, receiving money, paying for purchased goods and services, cash withdrawals, savings, and accessing loans.

How M-Pesa Promotes Financial Inclusion through Payment Innovation

M-Pesa has significantly promoted financial inclusion in Africa, where many people are unbanked or underbanked. Here are the different ways it is promoting financial inclusion through its payment innovation system:

  • Accessibility

According to a Pew Research report, 80% of Kenyan adults owned a phone in 2017, with 30% owning a smartphone and 50% owning a basic phone.

M-Pesa leverages this high mobile penetration rate in Kenya to allow those without bank accounts to make financial transactions. People don’t need a bank account to save, send and receive money, make bill payments, or even access loans, as they can do all that with their mobile phones.

A Statista report shows that 83.7% of people in Kenya had access to formal financial services (through bank accounts and mobile money) in 2021. This is a massive leap from only 26.7% in 2006, proving the accessibility mobile money has given Kenyans.

  • Convenience

M-Pesa simplifies financial transactions, making it easy for people to send money, pay bills, buy goods and services, and even access savings and credit features directly from their phones.

People in remote, underserved communities usually stay far from formal financial institutions and would require a lot of time and resources to go there. This is why the convenience M-Pesa brings is valuable to them, as it makes banking and other financial services accessible.

  • Reduced Costs

Reduction in the cost of transactions is one of the perks of mobile money that made M-Pesa achieve the level of success it did in Kenya. M-Pesa transactions are often more affordable than traditional banking services, making the platform a cost-effective way for individuals and businesses to manage their money and conduct financial transactions.

  • Security

Cash is too risky to carry around, especially in remote areas without a strong security network. This is one of the key reasons why those in rural communities are scared to travel to nearby banks to open or operate a bank account.

M-Pesa brought a solution to this by giving people accessibility and letting them save or transfer money from their mobile phones without visiting a bank. To enhance security, M-Pesa incorporates various features into its mobile money system to enable people to keep their money safe. Some of these features are transaction PINs and instant notifications, which work to protect the user’s funds and data.

The security measures from M-Pesa helped build trust in the system, encouraging more people to open an account and ultimately join the formal financial system.

  • Trust and Network Effects

The trust and network M-Pesa gained after its launch sustained it and facilitated massive adoption in Kenya. Currently, M-Pesa has over 30 million subscribers in Kenya, making it the largest mobile money network in the country and Africa.

As the system gained popularity and more users joined the network, it created network effects, making it more valuable for individuals and businesses.

The trust M-Pesa established encouraged adoption in the country, leading to its wide acceptance in other countries. It even led other network providers into the business, as Airtel, MTN, Orange, and many more went into mobile money operations.

  • Partnerships

M-Pesa partnered with various businesses and financial institutions to facilitate the adoption of the system and the absolute eradication of financial exclusion in the country. Since its launch in 2007, the financial exclusion rate in Kenya has continually decreased to 11% in 2021, making Kenya one of Africa’s most financially inclusive countries.

To bring more people into the formal financial system, M-Pesa’s partnerships with banks, other financial institutions, and businesses allowed users to transfer money between their wallets and bank accounts in real-time. For international transactions, M-Pesa partnered with PayPal to enable its users to transfer money to PayPal account users and vice versa.


M-Pesa showcases the transformative effects of efficient payment innovation in bringing financially excluded people into the formal financial system. The system has revolutionized financial services in Kenya and has served as a model for addressing financial exclusion in many countries worldwide.

The effects of payment innovation in most African countries, especially on the individuals and businesses that leverage it for day-to-day transactions, are overwhelming. Over 2% of Kenyans have been brought out of poverty due to this revolutionary financial services system, and more will follow suit, both in Kenya and other parts of the world, where many were financially excluded. See More!


Leave a Reply

Your email address will not be published. Required fields are marked *