The sharing of finances in work relations and among relatives was an economic inefficiency that existed before the invention of mobile transfer services in Kenya. Therefore, M-PESA has resolved this challenge by enhancing money circulation. This mobile money service provider offers a safe, secure, and cheap transfer of funds. For example, immigrant workers in the urban areas can send money to their relatives in rural places. The service is efficient and trustworthy compared to former means, such as using passengers traveling to help make money for people in rural areas. Moreover, the M-PESA has partly resolved unemployment, given that by 2016, 100,744 agents were earning directly from this service. The other economic inefficiency that has been fixed is the uplifting of low-income people in the region. For instance, M-PESA increased general consumption and lifted 2% of Kenyan households (194,000 families) out of poverty. MPESA has resolved several economic inefficiencies by improving livelihoods, enhancing safety in financial transfers, and creating employment.
Since the introduction of mobile money transfer in Kenya, M-PESA is widely used in the region, and many people opt to use it instead of the standard banking system. The provider has a typical price elasticity implying that a change in charges will affect the number of subscribers. The M-PESA applies this principle by allocating higher prices on the category of services transacted by many customers. Concerning the income elasticity of demand, M-PESA charges higher on the services which are mostly patronized by consumers. For example, the fee for withdrawing money from M-PESA through the agent is often more than the fees for transferring money from one user to another. The enterprise also charges low for registered users and higher for those who are unregistered.
There is a need to continually improve the business process to remain competitive and relevant to the needs of people. One of the strategies for Safaricom is to lower the sales charges to attract more customers from poor families. The expenses of adding more users are low because the fixed cost is scaled to accommodate many users at a time. Both the fixed and marginal payments are lowered so that they will be more affordable to the clients. Another strategy will be to integrate different services, including voice and data, for the customers and increase their revenues while attracting new market segments, such as the low-income earners. The company can also consider mergers and acquisitions to enhance its economies of scale. For example, M-PESA can merge with key competitors with similar missions and visions. For instance, there is Airtel money transfer, which is also majoring in performing its services in Kenya and neighboring countries. The acquisition will increase the number of customers and resultantly revenues. The company can, thus, exploit economies of scale by lowering its charges, diversifying its customers, and through acquisition network connections.
In such places where the Safaricom network is not boosted, people will opt for other banking services. Having a stable connection enhances the efficiency and reliability of transactions for the customer. In Kenya, Safaricom has 80% of the market share due to its robust technology. A sound system also implies that the company maximizes its profit by ensuring it has the strongest accessibility even in remote regions. The Equity financial service offers customers both investment consultancy and mobile transfer. This bank also has the highest market share in the banking sector in Kenya. The implication is that it competes for the same customer segment, thus lowering the demand for M-PESA. With the intense rivalry to maximize its profit, M-PESA must adopt a cost leadership strategy. The implication is that MPESA has to lower its transaction fee to be less than that of Equity. Strong leadership is also the key to maximizing profit.
The development of e-float was a strategic move suitable for the Kenyan market, where the majority of people are low-income earners who do not save on standard banking systems. However, the Central Bank of Kenya allowed M-PESA to operate its model under some restrictions to limit fraud. For instance, M-PESA has to give a non-profit organization all the interests it gains from deposit balances. There is also a restriction on the amount of money that a person is allowed to transact a day. The central bank also monitors M-PESA for any money laundering complaints; so far, the company has managed to avoid significant frauds. Another strategy is the use of external auditors to review all the financial details. M-PESA also has to provide its financial reporting openly to build trust with major stakeholders. It is in the interest of the company to avoid the issues of breaching trust so that it maintains a strong brand. The ability of Safaricom to enhance trust, participate in NGO initiatives, and avoid fraudulent cases controls the information asymmetries in financial transactions.
Unlike Kenya, the United States is a developed country where there are better alternatives for money transfers. For instance, even in rural areas, there are easily accessible local banks. The education level of people in the United States is higher. Every adult has the necessary knowledge for opening a bank account, unlike in Kenya, where most people are not educated. The payment system between employers and employees is delivered by hand, usually, without any contract, so many Kenyans do not need bank accounts. Also, some pawnshops can be used for retail at a low commission. In Kenya, before the invention of M-PESA, people used informal bus transportation to send money to their relatives. In some cases, money was sent through the post office, and it would take more than seven days before reception. The United States also has such options as Google Wallets, which are way more efficient.