The Home Economics of E-Money: Velocity, Cash Management, and Discount Rates of M-Pesa Users.

M-Pesa, a service operated by the mobile phone network Safaricom in Kenya, allows users to deposit money onto their telephone handsets, transfer e-money to another user with a simple text message, and withdraw cash at one of thousands of outlets throughout the country. The system is safer, cheaper, and far faster than the money transfer systems that it replaced. Although only five years old, M-Pesa has achieved remarkable penetration into the Kenyan economy. As of September 2011, there were 32,000 M-Pesa outlets at which individuals could exchange cash for e-money or viceversa, in a country that as of 2009 had 491 bank branches, 500 postbank branches, and 352 ATMs (Mas and Ng’weno 2009). In the sixmonth period April–September 2011, the volume of transfers was Ksh 314 billion, compared to nominal GDP of Ksh 2.99 trillion that year. (For the period from which our data are drawn, the market exchange rate was approximately 75 Ksh/dollar, and the PPP exchange rate was approximately 35 Ksh/dollar). At present, M-Pesa is primarily a money transfer system. However, it has the potential to evolve in two exciting directions: first as a gateway via which unbanked households can access financial services, and second, as a transaction medium, with e-money partially replacing cash.