Banking in the M-PESA Age: Lessons from Kenya

Three approaches Kenyan banks use to respond to mobile money

This Working Paper explores the key strategies banks in Kenya have used to respond to mobile money. The strategies discussed include direct competition over a mobile channel, such as through Equity Bank’s mobile product Equitel; collaboration with mobile money providers to offer banking services, such as through Commercial Bank of Africa’s M-Shwari; and industry coordination to create alternatives to existing mobile money products, such as the small-dollar interoperability scheme introduced by the Kenya Banker’s Association. 

Each approach demonstrates that, while nonbank mobile financial services can fundamentally reshape the financial sector in a developing market, as they have clearly done in Kenya, mobile services need not represent an existential threat to the traditional banking industry. In fact, the reach of models such as M-PESA can enable and even incentivize innovation in the banking sector, including a shift in focus to increasingly lower-income consumers. Kenya’s experience shows, above all, that retail banks can thrive in the face of mobile money, as long as they are prepared to adapt.

About this Publication

By Cook, W. , McKay, C.