Bridges to cash: the retail end of M-PESA

M-PESA is a remarkably successful mobile payments system launched in Kenya three years ago. Users are able to send money to each other conveniently from their M-PESA using only their mobile phones. A key to the success of M-PESA is the availability of an extensive network of retail shops that accept M-PESA deposits and withdrawals, i.e. they stand ready to exchange cash and electronic value. It is the stores that provide liquidity to the system, and they are paid a commission by M-PESA for this service. Behind the store is a network of intermediaries that arrange the logistics around cash management. In this paper we look at daily transactional data from six M-PESA stores in Western Kenya supplemented by case studies and interviews of MPESA store managers and employees in order to better understand the liquidity management needs of these stores. We examine how liquidity needs vary by location and day of week/month, and by the level of service offered by the store. We find that stores require intense daily management of liquidity to maintain customer service levels and that this is more difficult in rural areas. We also find some evidence of market discipline for agents who can’t maintain service levels.