Using their mobile phones, customers of M-Pesa can deposit and withdraw funds from their accounts. The introduction of M-Pesa in Kenya provided the people of that country with an additional option for gaining access to banking services.
M-Pesa was first introduced in 2007 by Safaricom, Kenya’s leading mobile phone operator. M means mobile in English and Pesa means money or payment in Swahili, hence the service’s name is a combination of those two words.
How M-Pesa is changing the monetary landscape in Africa
In essence, M-Pesa is a SIM-card-based, digital banking platform. Once the SIM card is placed into the mobile device’s card slot, users can send money to friends and family or make purchases with their mobile phone.
Users without bank accounts can still use M-Pesa because of the widespread network of retail locations. The user hands the cash over to the kiosk employee, who then deposits the funds digitally into the user’s M-Pesa account.
Financial inclusion, which is primarily aimed at an underbanked or unbanked population, is a motivating factor for Fintech developments like M-Pesa. That is why you will find some of the best forex brokers accepting M-Pesa.
This drive towards “financial inclusion” on the African continent is making it possible for people who don’t have access to banks or who can’t afford the minimum deposits to use digital banking services.
The success of this programme depends on the cooperation and information sharing amongst several sectors in order to construct a useful digital platform.
How M-Pesa operates as a banking alternative
Safaricom stores the funds amassed via M-Pesa transactions in various bank accounts. The accounts can be used like any other checking account and are protected against losses up to one million shillings (about $1,000) thanks to the Deposit Protection Fund.
When using M-Pesa, customers are given receipts as verification of their purchases. Telephone numbers serve as account numbers in a transaction, thus they must be exchanged by the buyers and sellers.
The amount that was added or subtracted from the user’s account, as well as the full name of the counterparty, are sent by text message after settlement.
The instantaneous availability of the mobile receipt aids in maintaining open communication between all parties while also creating a useful online community.
Social effect of alternative banking services like M-Pesa
The standard of living in Kenya has risen significantly because of mobile payment systems such as M-Pesa. Taxi drivers, farmers, debt collectors, and market traders can all conduct without frequently handling huge sums of cash.
Theft, robbery, and fraud are all less likely to happen as a result. Also, M-Pesa allows customers to pay their water and power bills without having to stand in line for hours.
In rural and outlying locations, M-Pesa facilitates secure and convenient mobile banking for small company owners.
Importantly, it also means that Forex traders in Kenya can now open trading accounts with Forex brokers even if they are unbanked, opening them up to the world of Forex trading and the many opportunities for profits which is presents.