Letters to the World Bank on Digital Payments

From the National Telecom Association

The National Telecom Association recommends that the World Bank support a MPesa-like payment solution in our country. Driven by at least one mobile network operator (MNO), an MPesa-like solution offers a financially inclusive, low-cost payment solution tied to customers’ SIM cards. It offers varied services, including cash-in/cash-out and microloans, and can be secured with multiple verification measures.


Potential demand: An MPesa-like solution, with its large breadth of services and high accessibility, would meet rising consumer demand for a quick, simple, and low-cost payment solution. It would also be able to embrace the growing small and medium-sized enterprise (SME) segment, which currently faces significant barriers in traditional banking systems (high interest rates, expensive point of sale systems, etc).

Retail sector: Not only does a robust agent network already exist (supported in recent years by Central Bank financial inclusion initiatives), but it has drastically increased in transaction volume due to the COVID-19 pandemic: agent transactions increased by 859% between March and April 2020. The network has demonstrated its ability to handle high volumes, and is only likely to grow due to recent increased demand.

Socioeconomic context: The MPesa-like solution is less tied to formal banking infrastructure than a UPI-like solution would be; it is thus primed for quick rollout to the 40% of our population that is currently financially excluded and in desperate need of a payments solution. High uptake is also likely amongst the growing youth population, especially in urban areas, who have strong trust in digital payment systems and existing access to digital infrastructure.

Risks and mitigation

Regulation: The local regulatory environment is still closed to the administration of mobile money services by MNOs. However, in 2015, the Central Bank published a Regulatory Framework that includes a non-bank-led option, indicating an openness and practical path for an MPesa-like solution run by telecom provider(s). While the Central Bank has a place for MNOs in its financial inclusion vision, it has opted to address risks associated with failure to scale by increasing the capital requirements for licenses. This high barrier to entry could be addressed by support from institutions like the World Bank.

User perception: Implementation of MPesa-like solutions has failed outside of Kenya, in part due to weak marketing efforts. Though some consumer segments exhibit trust in digital systems, more marketing is needed to promote the security and convenience of this solution. Given that 55% of customers learn of fintech products through referral, even a small-scale marketing effort can generate exponential impact.

Existing mobile market situation: Though our mobile penetration rate is only 49% (vs. Kenya’s 90%), the number of unique mobile subscribers is actually twice that of Kenya’s, given our large population size. However, the mobile market is highly fragmented, with the largest player possessing only 37% market share. Our solution will need to have an interoperability component to be truly inclusive. While MPesa’s voucher system is a good interim method, our Association proposes exploring interoperability agreements between MNOs, with the potential to share digital infrastructure, in order to reach more customers.

From the Consumer Advocacy Coalition

On behalf of our nation’s people, we recommend that the World Bank support a Unified Payments Interface (UPI) solution. Given its track record in India, UPI has demonstrated that it can meet consumer needs with adequate protections, without incurring the major social risks that an MNO-led system would.

Meeting consumer needs

  • Usability: According to consumer research, the user experience is a non-negotiable factor for multiple customer segments. Experienced technology users are unwilling to even wait for a one-time-password to be sent to their phones; while populations in rural areas require easy access, with few requirements for documentation or physical travel. UPI generally meets these needs. By leveraging existing infrastructure from our banks and national e-ID system, UPI only needs two pieces of information per transaction (recipient ID and MPIN).
  • Dispute resolution: UPI was built by a government agency in India; due to accountability to citizens, such an agency is arguably more responsive to consumer concerns than a monopolistic MNO might be. This responsiveness was demonstrated when merchants were mistakenly charging consumers; UPI immediately made a correction in the second version.
  • Cost: In India’s UPI system, peer-to-peer and person-to-merchant transactions were free of charge. This generous fee scheme incentivizes greater uptake of the UPI system and reduces the cost burden on consumers.
  • Security: UPI subscriptions require linkages to a national e-identity, which is a system present in our country. The requirement of two identifiers to make a transaction further secures the process.


Although UPI demonstrates great promise for our consumer base, it is more functionally restricted than an MPesa-like solution. However, these added functions are not worth the risks that threaten the digital and financial security of consumers, as well as the significant barriers to usability.

  • Cash-in/cash-out: The most popular service of MPesa was the cash-in/cash-out function. While the agent network needed to enable the service exists, the cash-in/cash out system undermines progress towards our goal of a cashless nation. The Central Bank’s daily limits on cash transactions may also limit the usefulness of this service.
  • Microloans: UPI did not offer a loan function; if it did, it would be housed within the infrastructure of individual banks, and likely reflect the traditional high interest rates. Though MPesa’s microloan system offers financial opportunity to users, it comes at a high social cost, given the potential for a debt crisis (as we saw in Kenya).

Perhaps the largest limitation of UPI in our national context is its reliance on banks. Only 40% of our adult population holds at least one formal bank account — a requirement of using UPI. Fortunately, barriers to greater inclusion in traditional banking systems revolve around capital. High costs of rural operations have kept banks out of large swathes in the country so far. A potential solution would be to subsidize rural expansion with grants from the World Bank, to ensure UPI could reach all citizens. Even without relying on grants, it is possible for banks to achieve scale in our dense urban areas alone, where middle and upper-class citizens will likely supply high-volume and high-value transactions. Our Central Bank could mandate that bank operators use these profits to expand into rural areas, bolstering our progress towards greater financial inclusion.



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