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M-PESA at the point of sale: Expanding financial inclusion and reducing demand for physical cash

Author

Listed:
  • Banka, Holti

    (PhD at the School of Public Policy, University of Maryland, USA)

Abstract

This paper proposes the idea of the M-PESA service being used for purchases at the point of sale (POS). In some large supermarkets in Kenya, customers are able to use M-PESA for payments, but those transactions are recorded as transfers and, as such, transfer fees apply. Safaricom recently launched a platform for bill payments in restaurants through M-PESA, and the expansion of this service to smaller stores in rural areas would have quite an impact on the process of financial inclusion. The paper also offers a comparative perspective between cash withdrawal fees and transfer fees through M-PESA, arguing that adjustments need to be made to the pricing scheme if Safaricom is to employ POS payments. On the cost side, the idea of POS payments would reduce demand for physical cash and reduce operational costs for Safaricom. Additionally, the paper proposes the idea of combining merchants with M-PESA agents, in order to reduce fixed and training costs, which could further allow for downward adjustments in the price of new payment services at POS from Safaricom.

Suggested Citation

  • Banka, Holti, 2014. "M-PESA at the point of sale: Expanding financial inclusion and reducing demand for physical cash," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 7(4), pages 359-369, January.
    • Handle: RePEc:aza:jpss00:y:2014:v:7:i:4:p:359-369
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    Cited by:

    1. Shahid Manzoor Shah & Amjad Ali, 2022. "A Survey on Financial Inclusion: Theoretical and Empirical Literature Review," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(4), pages 310-330, December.

    More about this item

    Keywords

    M-PESA; POS; financial inclusion; cash; merchants;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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