The latest report from the Communication Authority values Customer to Business (C2B) transactions via Mpesa in the first quarter of 2020 at KSh 310.1 Billion, accounting for 98% of the country’s C2B mobile money transactions. Similarly, the report for January to March 2020 values Business to Business (B2B) transactions at KSh 878.1 billion, whereas Customer to Government for the quarter at KSh11 billion. These values, especially C2B and B2B transactions are likely to increase with the new feature that allows Businesses using the Lipa na Mpesa App to withdraw money instantly from their mobile phones and bank accounts.
The growth of B2B transactions past the value of Person to Person (P2P) transfers, currently at KSh 673.6 billion for the quarter shows the increased focus on SMEs. Tracing back the Evolution of Lipa na Mpesa shows the driving demand to enhance the tool for business purposes.
The Evolution of Lipa na Mpesa
While Mpesa launched its services in 1st March 2007, the service mainly focused on enabling mobile transactions, leveraging on the Kenyan culture of transferring funds to folks in the rural areas. The growth in transactions, especially in the informal sector, where businesses people order goods and pay on arrival, called for a system to promote payments in businesses.
Further, adoption of Mpesa services businesses called for a system with a semblance of recordkeeping, showing details and purpose of payments. Hence came the Lipa na Mpesa Pay bill in 2009. Then, transactions were not yet real-time, with Safaricom acting as a verifying broker for the transactions. In 2012, however, transactions became faster, thanks to bots.
2013: Launch of Lipa na Mpesa
However, as Mpesa grew, not every transaction between businesses called for an account number. This is because, unlike service providers and big businesses, small businesses do not have ties between with customers. Till numbers came to life in 2011, accounting for transactions between customers and informal business, growing more popular than the Paybill, its predecessor. Later, Lipa na Mpesa as a service officially launched in 2013.
At inception, the service, like many still had a lot of paperwork involved. Registration for Lipa na Mpesa was manual, requiring businesses to fill in forms and send them to the Safaricom headquarters. Then, it could take up to a month to register for the payment service. Further, customers would have to visit a Safaricom shop to reconcile their financial records.
2015: Lipa na Mpesa Digitization
2015 was a significant year, for Mpesa. The migration of Mpoesa servers from Germany not only brought a faster and more reliable system but also allowed real-time transactions for bills. Previously, electricity bills could take up to 48 hours to reflect in Kenya Power’s distributor system.
Safaricom also launched Lipa na Mpesa Application Program Interface (APIs) allowing third parties on their platforms.
The APIs also allowed customers to confirm and approve transactions through API validation. These changes helped reduce inconveniences that came from customers paying on the correct till, but wrong account numbers, which called for follow up. The service dubbed “Hakikisha” also applied for person to person transactions, where customers could verify recipient details and amounts before sending money.
In 2015, M-pesa also upgraded the B2C system, allowing business customers transacting via their web portal to automate payments to employees and other merchants.
Registration for the service also became simpler after 2015, where businesses could now register for Lipa na Mpesa through the USSD code *234#, share details via [email protected] and access the service in 48 hours. Further, businesses could now access statements for reconciliation directly through their email.
2017: The Daraja API and Mpesa 1Tap
Safaricom launched The Daraja API, which enhanced the checkout experience fro businesses using its API services. The API prompts a customer’s STK immediately the customer checks out on a business’ payment page and prompts the user to enter their Mpesa pin and authorize the transaction.
Safaricom also launched Mpesa 1Tap, a service that allows users to make payments to Lipa na Mpesa stores using a card, phone sticker or wristband connected to their accounts.
2020: Lipa na Mpesa App “Mpesa for Business”
This year, Safaricom launched a new feature allowing direct transactions from business tills, allowing businesses to send money and make payments directly. It also rolled out a digital version of the service on the Mpesa For Business App, allowing businesses to not only withdraw money from their phones and bank accounts, but also make withdrawals from multiple till numbers under the same business.
Allowing businesses instant access to money in their wallets enables them to conduct businesses more efficiently. Previously, businesses could only access funds from their tills after a designated period, agreed upon signing up for the service, with some taking up to a month before they could access finances. As a result, businesses could not access supplies or finance bills like salaries in cash before Safaricom settles their accounts. This affected when how soon they could replenish supplies.
Instant transactions on business tills are now a reality, thanks to real time settlement of funds by safaricom. The telcom giant now instatenously deducts charges from the businesses’ wallet, freeing up a merchants’ funds.
The app also allows businesses to pool funds from multiple branches directly to the headquarters, as well as monitor all till numbers under one business, using visual tools that easily show how much money came in the business and how much went out.
The evolution of Lipa na Mpesa is happening at a time when cash is still king in Kenya. The changes, however, could encourages more SMEs to adopt the service, slowly moving the country to digital transactions.