Mobile penetration in the globe

Mobile phones are ubiquitous and now estimated to hold high subscription levels globally; there is now an estimated 6.8 billion subscriptions¹⁴ of the globes 7.1 billion population (International Telecommunications Union, 2014). This implies that the ratio of mobile subscriptions to humans is approaching par. However, the success of a technology is not a predestined outcome only of its existence, rather, value propositions are required to give each party incentive to access an offer (Pousttchi, Weizmann, & Turowski, 2003, p.414). An extant theory of informational added values supports this view, positing that every business model needs to prove its capability to generate a benefit for the customers that would pay for it (Kuhlen, 1996). Mobile technology such as cell phones offers core benefits like ubiquity and personalization amongst others (Kim, Chan, &

Gupta, 2007). Ubiquity enables access to various mobile-enabled services at anytime and place, whilst personalization allows for multiple customizable services on mobile platforms. These two benefits are ample basis to entice individuals to use mobile technology. As such, the accessibility and growth of mobile technology creates novel opportunities for businesses and individuals (Kim,

14 Mobile phone subscriptions are offerings to the public mobile vendor that provides access to the public switched telephone network (PSTN) using Cellular technology.

Kim, & Wachter, 2013). In a consumer vein, the GSMA (2014) opines that drivers to mobile subscription growth will emanate from the developing regions, and are projected to provide about 880 million subscribers within a seven year period, whereas, only 56 million will stem from developed regions.

As is, developed regions now have an average unique subscriber penetration level of 79%; a figure considered the demographic ceiling- where subscription growth is likely to stall (GSMA, 2014). Conversely, developing regions stand at 41%, as only 4 of 10 individuals in this region have mobile phone subscription (GSMA, 2014). On a continental level, unique subscriber penetration rates vary notably across regions. Europe ranks the highest penetrators, then North America, and then Sub-Saharan Africa ranks the least, although it is credited with increasing subscription growth above any region in recent times (GSMA, 2014). Collectively, given acknowledgements to developing regions for the increasing mobile subscription rates, with an emphasis on sub-Saharan Africa- where Kenya resides, this study notes the identified potential of the mobile phone within the region that awaits realization, and seeks to support understanding of use with extant mobile technology-enabled products and services in this part of the developing world.

This section has briefly outlined the present state of mobile subscriptions globally, and highlighted a need to focus on developing regions, and further Africa. The next section briefly discusses the state of mobile phone coverage in sub-Saharan Africa.

2.3.1 Mobile Phone Coverage in Sub-Saharan Africa

The mobile infrastructure in Sub-Saharan Africa is consistently evolving across key industries as individuals, business, and government are constantly embracing mobile technology to facilitate services (Ericsson, 2014). Erstwhile, in 1999, a scant 10% of the population had coverage, and this was predominantly in South Africa and Senegal (Rotberg & Aker, 2013). In addition, Rotberg

& Aker citing wireless intelligence, 2008) report that, in monitoring growth rates, individual owners of mobile phones in this region rose from 16 million to 376 million between year 2000 and 2008. As of 2012, mobile ownership in the region stood at over 500 million; a significant

population¹⁵ of the continent (Rotberg & Aker, 2013). Further, Ericsson (2014) asserts that by the close of 2014, there would be over 635 million subscriptions in Sub-Saharan Africa. Additionally, Ericsson (2014) reports predictions of subscription rates to reach 930 million by the end of 2019.

Collectively, it can be inferred from this statistics that the mobile phone is rapidly becoming a tool accessible to all in a developing region- Africa, and consequently technology vendors continue to seek ways to develop services and products via this medium to meet various needs of the increasing user base of this technology.

This section has provided a background to the proliferation of mobile phones within the globe and Africa. An overview of mobile diffusion within the continent was vital because M-pesa is enabled by mobile technology. Next, the researcher provides a synopsis of the first mobile-enabled finance service targeted at the unbanked.

2.3.2 Chronicles of mobile-finance initiatives for the Unbanked in Africa

The first mobile payment initiative in Africa was launched by WIZZIT Payments (Pty) Ltd, in South Africa, in 2004. Wizzit is a division of the South African Bank of Athens, however; it is owned and operated by a team of independent entrepreneurs (Porteous, 2006). This vendor provides simple banking services for the unbanked and underbanked¹⁶. At the time of Wizzit’s inception, half of South Africa’s population were unbanked; due to high poverty levels and reluctance by banks to serve a poor customer base (Nobel, 2011). Yet, the founders of Wizzit deemed it dignified and feasible to offer banking to the poor through a mobile banking platform that could be operated on a basic cell phone. Its services are mobile-enabled for accessing bank accounts and executing transactions, and include a Maestro debit card that is issued to all customers after registration. Wizzit is a branchless banking service, implying that its services do not require users to visit banking outlets. Although Wizzit does not operate any branches of its own, it partners with the Absa Group and the South African Post Office which serve as banking agents and permits Wizzit's customers to deposit funds at any Absa or Post Office branch.

Equally, Wizzit does not operate any automated teller machine (ATM) network but its users can make deposits and withdrawals with their debit card at any point of sale (POS) or ATM accepting

15 Africa has a population of 1.033 billion (world population review, 2015).

16 Unbanked refers to individuals who do not have access to banking services, while underbanked refers to person whom have inadequate access to banking services.

Maestro cards. The user base of Wizzit between its inception and 2008, stood at 250,000 in South Africa. Nonetheless, it has rolled out pilot projects in Romania, and intends to expand into other African countries such as: Kenya, Botswana, Namibia, Zambia, and Malawi (Lapper, 2009), and figures of its present user-based is unavailable. Mindful of this backdrop, the uptake of Wizzit (250,000 users within four years) is absolutely incomparable to that of M-pesa (8.6 million with two years), and as of 2009, Wizzit was not yet profitable (Nobel, 2011). There are speculations on causes of Wizzit’s failure but scant empirical evidence exists to support the claims. The failure of Wizzit highlights the need to understand the real needs of customers and not vendor perception. In light of this study, M-pesa has thus far attained an astounding initial and rolling uptake; however, it is the first success story of a financial service proliferation amongst the masses in a developing country. To uphold this pace, and alleviate the possibility of a stall or decline in use, it of utmost importance to investigate drivers that sustain its use, which would aid circumvent an emphemeral success story.

Next, the researcher provides an overview of Kenya-the geographical focus of the study, and subsequently, discusses the financial sector profile of the country, and then provides background to the inception of M-pesa.