INTRODUCTION

1.1 Safaricom M-pesa Background

Safaricom is Kenyas major mobile operator and is 40 percent owned by Britains
Vodafone. Safaricom provides a wide range of fixed and mobile communications and valueadded services to over 19 million subscribers. Safaricom launched the M-Pesa mobile money
service in Kenya in march 2007. M-Pesa is based on a technology platform developed by
Vodafone. M-Pesa has subsequently grown to become the most successful mobile money
service in the world and the benchmark for others that have followed in its wake.
M-Pesa is an innovative mobile payment solution that enables customers to complete
simple financial transactions including person to person money transfer. It is aimed at mobile
customers who do not have a bank account, either by choice, because they do not have access
to a bank or because they do not have sufficient income to justify a bank account. M-Pesa has
been designed to people who do not have bank account so that people without bank accounts
can use it. The money is held safely in a bank account run by m-Pesa on the behalf. So do not
have any contact with the bank and the bank does not have the details.
The service is not only a significant revenue generator for Safaricom but also provides
immediate benefits to previously unbanked users by putting affordable financial services within
their grasp. It also offers provides monetization opportunities to large agents network who
support M-Pesa, along with entrepreneurs both small and large who use M-Pesa to drive their
business. Banking partners are the foundation of the M-Pesa service, and Safaricom has
secured alliances with all the countries major banks, and has an agreement with western union
for international money transfers.
Safaricom was the first company to offer a mobile based international money transfer
service. In 2009, it was awarded "best mobile money service" by global mobile awards, for its
innovation. It provides unbanked customers safe, fast and easy access to remittances. At the
2011 mobile world congress, organized by global system for mobile communications
association (GSMA), M-Pesa was awarded the mobile money for the unbanked award.
Safaricom has continued to offer further services with M-Pesa, for example through the 2010
launch of the nunua na M-Pesa, a service which allows M-Pesa customers to purchase
groceries, and m-ticketing, providing the ability to book and pay for tickets to concerts, sporting
and other events. In 2011 Safaricom introduced lipa karo, a service that permits M-Pesa
customers to pay school fees.
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BODY
2.1 Safaricoms M-Pesa Existing Strategies to Achieve Objectives

In order to establish itself and accomplish their objective, M-Pesa had to overcome three
hurdles that are common to any new electronic payments system strategy such as trust,
network effect, and chicken and egg trap. The first new system is trust. Trust is making users
comfortable with the reliability of the new system. In this case, customers had to be comfortable
with three elements that were new at the time in Kenya is a payment system that was operated
by a mobile operator, going to non-bank retail outlets to meet their cash in or cash out needs,
and accessing their account and initiating transactions through their mobile phone. Second new
payment system is network effect. Network effect is the value to the customer of a payment
system depends on the number of people connected to and actively using it: the more people
are on the network, the more useful it becomes.4 while network effects can help the scheme
gain momentum once it reaches critical mass, they can make it difficult to attract early adopters
in the early phase when there are few users on it. Lastly is chicken-and-egg trap is the new
payment system. In order to grow, M-Pesa had to attract both customers and stores in tandem.
It is hard to sell the proposition to customers while there are few stores to serve them, and
equally hard to convince stores to sign up while there are few customers to be had. Thus, the
scheme needed to drive both customer and store acquisition aggressively.
Next strategy is branding. Safaricom built a strong service brand for M-Pesa, which rode
on strong customer sense of affinity with and trust in the operator. In order to maximize the
chance of acceptability in an unprepared market, Safaricom went for a full-blown national launch
such making the value proposition equal for all subscribers and increasing the likelihood that the
service could reach a critical mass in a short time frame. Safaricom also was deliberate in its
messaging and marketing mix. For example, M-Pesas launch was associated with a significant
advertising campaign in traditional media such as TV and radio,18 there was also massive
outreach through road shows and tents that traveled around the country signing people up,
explaining the product and demonstrating how to use it. Safaricom was able to leverage public
goodwill that existed with the corporate brand, and treated M-Pesa stores as valuable brand
outposts. All this was supported by a service that was designed to be simple and easy-to-use.
For example, M-Pesas brand development and awareness-raising were driven by clear and
specific messaging. Safaricom had a clear understanding of the key customer need they were
addressing.
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Besides that, channel management is also the strategy used by Safaricom. Safaricom
effectively leveraged its extensive network of airtime resellers to build a reliable, consistent store
network that served customers needs. Safaricom had to design a channel structure that could
support thousands of M-Pesa stores spread across a broad geography to offer cash in or cash
out services. Safaricom built a channel that was based on the key requirements of profitability
by providing incentives for third-party retail players to get involved, scalability by achieving rapid
growth and control by over the brand, customer experience and geographic distribution of
stores. Safaricom understood that the primary role of the mobile phone is to enable the creation
of a retail outlet-based channel for cash-to-digital value conversion. Senior managers drove the
development of a fully managed retail channel strongly. Stores acting have consistent branding,
received substantial on-the-spot training, and were frequently visited and supervised.
Lastly is pricing strategy. Safaricom designed a pricing scheme for both customers and
stores that provided incentives for both to join M-Pesa early on. Customer pricing was designed
also to encourage customers to experiment with the service such as free and quick registration
to the service, free deposits, and ability to send money to any mobile phone subscriber whether
or not they were subscribed to the service. Safaricoms profit margin is loaded on peer to peer
transfer fees rather than on the cash in or cash out fees, reflecting that customer willingness to
pay is higher for remote payments where customers alternatives are weakest. Stores receive
new customer registration bonuses which not only incentivized growth but also provided good
cash flow to stores in the early days while transaction volumes were low. M-Pesa shows to the
people the value of fast, easy to use service far ahead of price. While users are reasonably
happy with M-Pesa pricing, it is interesting to note that M-Pesa users do not tend to be aware
that deposits are free. This might help explain why M-Pesa is not used so frequently as a daily
deposit service, despite the substantial value that Safaricom provides for this use case.

2.2 Safaricoms Competitors and the Strategies They Used

2.21 Equity bank

The first competitor for Safaricom is Equity Bank. Equity bank has secured a license to
operate as a virtual mobile network operator, providing the bank with access to their own SIM
cards and security. This puts equity bank in a position to compete directly with Safaricom for
mobile money and data services creating a new level of competition for Safaricom.
Equity banks plan is to bring a full range of banking services to the marketplace via the
mobile phone with a much more competitively priced offering than the existing provider as well
as being capable of operating across all mobile networks. Fair pricing is the key slogan of the
equity bank campaign. Equity bank grew its business in the low income segments largely
ignored by Kenyas other banks, and as a consequence it has one of the lowest cost-income
ratios at 49%, as it primarily uses agents and self-service rather than branches. It now has 50%
of banking customers in Kenya. Equity bank has a cost model which positions it very well to
challenge M-Pesa, hence its strategy of providing a lower cost alternative to M-Pesa.
The aggressive strategy use by equity is issuing all its customers free SIM cards to
register for the service through which the bank also plans to disburse short-term loans to its
customers an interest rate of between one per cent and two per cent per month, compared to an
average market rate of five per cent. The mobile banking service will run on the NFC network
technology, which will enable customers to pay for goods and services by simply tapping their
handsets at point of sales (pos) terminals.
This is equitys latest stab at mobile banking after a previous partnership with the
telecommunication firms through its M-Kesho product hit the rock. With owning sim cards equity
will remove the middlemen role to reduce the costs, increase the earnings and pass the benefits
to the customer. Equity sees a future where its main interface with the customers will be through
mobile banking, effectively building convergence of financial products and services on the
mobile phone.

2.22

Airtel

Next competitor of Safaricom is Airtel. The strategy used by Airtel is entered into a
partnership financial services institution BGFIBank group to expand mobile money access to the
later's customers in Africa. Airtel money and BGFIBank group will also launch products and
services in the four countries, including mobile savings account, mobile loans and international
money transfer services. Airtel money customers that are BGFIBank account holders will be
able to transfer money between their bank accounts and Airtel money, check their BGIF account
balance, confirm transactions on their BGIF accounts, order cheque books and ATM cards and
access to bank statements,
In additional, Airtel has over 3000 Airtel money agents spread across the country to
make available mobile banking services to everyone. This will make customer easy to do
transaction using mobile banking everywhere and faster to compete with Safaricom Company.
Besides that, Airtel customers can move their Airtel money between mobile wallets and
their bank accounts to using the anytime with bank ATMs spread across the country. This
service goes a long way in promoting a cashless economy by enabling customers to make
transactions with their Airtel money e-wallet at anytime, anywhere and replenishing it with more
electronic cash from their accounts in case of need.

2.4 SWOT Analysis

make transaction more

easier
save the time
safer place to store money
rather than at bank
can operate outside the
structure
of
formal
financial sector
pioneer in world as mobile
money provider

too depended on mobile

devices only
worries over hacking

STRENGTH

WEAKNESSES

OPPORTUNITIES

THREATS

world leading in the

mobile money system
market enlargement India, Tanzania and
Afhganistan
increasing mobile devices
penetration

lack of security and

privacy of data
lead to money laundering
and fake account
on going development
cost
slow adapter among
people world wide

2.41 External Opportunities and Threats

a) Opportunities
In the case study of mobile money revolution for Safaricoms M-Pesa, we can identify
the external opportunities and threats of the company. In the opportunities for the Safaricoms
M-Pesa, they are the world leading in the mobile money system. The system has started at
Kenya in 2007 and the Safaricom is the company that produces this kind of system whereby we
no need to have cash in making the transaction. All business and transaction that involve
money will be exchange with M-Pesa in Kenya. It shows that they are the world leading in
mobile money system whereby others countries has not practice it yet.
Another opportunity towards mobile money revolution is as a first mover of mobile
money system the Safaricom can promote their services throughout other countries. For
example they are making a market enlargement to India, Tanzania and Afghanistan (Why does
Kenya lead the world in mobile money? , 2013). From the enlargement that have been done by
Safaricom it shows that their services it the best and other countries can put their trust on the
service offered.
Next opportunity that can be gain by Safaricoms M-Pesa is they can increase mobile
device penetration. Since they are providing the service of mobile money, they also can do
business in marketing the mobile device. It is because in using the mobile money they need to
have mobile device and the SIM card of Kenya number. They can penetrate others sector that
related with the main services which is mobile money. Others is from the service offers by
Safaricom, the user of mobile devices have been increased. All people nowadays at Kenya will
have their own personal devices.

b) Threats
The threats of the Safaricoms M-Pesa are when they are conducting the mobile money
service, there will be the thing that the users or consumer feel insecure. It is because the
transactions of money are based on the sms and sometimes the users do not have an account
at the bank only account of M-Pesa. Moreover, there also a doubt feeling arise from the privacy
of data when using this services. People can detect our account or identification number when
there are transactions occur. It can be threats to the company that can affect the trust of the
consumer.
Others threat is when using M-Pesa it will lead to money laundering and the fake
accounts. Perhaps there is opposition from the bank and the regulator that can claim that those
services can lead to money laundering. It is due to the consumers that do not have the existing
bank account at the bank. The Kenyan banks have made the opposition where they claimed
that the users of M-Pesa is the victims for the money laundering and they also victims for the
pyramid scheme play by Safaricom company (Authors reveal how banks fought hard to kill MPesa - See more at: http://www.the-star.co.ke/news/article-153875/authors-reveal-how-banksfought-hard-kill-m-pesa#sthash.sO9FSKYH.dpuf, 2014).
Lastly the threats of mobile money to Safaricom are they need to have ongoing
development of their services. In maintaining and upgrading the services there will be cost
incurred. It can be threat to the company in getting the sufficient fund to support their
development. For the mobile money services, there also slow adaption among the people
worldwide. Only at Kenya and a few countries that have using this system and services. In
penetrating other market or countries, Safaricom need to make a lot of advertisement in helping
them have a new segment for their business.

2.42 Major Strength and Weaknesses

a) Strength
The strength of using Safaricom M-Pesa are firstly by using mobile money it will make
transaction more easier. The user does not have to go the banks for having the transaction. The
transaction only by sending the sms and we have paid for the service we consume. Besides it
also will save the time whereby no need for us to queue at the bank in getting our money. All
kind of services and products offer at Kenya can be buy by using M-Pesa. For the tourist they
can only use M-Pesa at Kenya without brings the cash money.
Another strengths of M-Pesa is the mobile money can operate outside the structure of the
formal financial sector. The people of Kenya do not have a formal bank account but still they
can use mobile money in purchasing the products or consume the services. Besides the Kenya
people think that by the using mobile money it is safer than placed the money in the bank. The
last strength of Safaricom M-Pesa is they are the pioneer in the world as a mobile money
service provider. It gives them the strength since only at Kenya and Safaricom as a provider and
own for this service.

b) Weaknesses
For the company, although there is the biggest company in the world they also will have
some weaknesses that can affect the company business. The competitor will try anything in
order to find the weaknesses of their opponent. It same goes to the Safaricom M-Pesa.
Although they are world leading in mobile money, there are some weaknesses that can be
found for this service. Firstly, this service only depended on mobile device. For the user in using
this service they need to have hand phone first. If not the action of mobile money transaction
cannot be performing. If can affect the service offered by Safaricom because not all Kenya
people own their own personal mobile device. For example, if the foreigner or tourism came to
the Kenya they need to have or buy mobile devices at that country and also need to get Kenya
sim card in order to have an account for the M-Pesa. It is because majority all places in Kenya
are using M-Pesa and the process of buying and paying is by using mobile devices with the
Kenya sim card.

Next is by using M-Pesa there also will be some issues over the hacking problem. In
performing the transaction between two parties, they need to exchange their phone number and
their identification. From that all parties that we had made the transaction will know our phone
number and identification. For the illegal action, the parties might copy our phone number and
using our mobile money account. Besides, if we are the tourist, for example in using the taxi, we
need to exchange the phone number with the driver in paying the fees for the ride. The taxi
driver maybe will keep calling us to offer the service since they already know our number. They
will hack our vacation at Kenya from the phone call offering the services.

CONCLUSION
3.1 Objective and strategies recommend for Safaricoms M-Pesa

3.11 Objectives
Focusing to market products within undeveloped region by interact with the existing
payment structures.

3.12 Strategies Recommendation

In this case study, mobile money transfer has high possibility of hacking data of account
mobile user that may cause loss of money. Technology run so fast and so human want the
best services that can save them from any possibilities of being hacked. It is best if
Safaricoms provided benefits such as secrecy of information for every user of M-Pesa like
offshore banking so that this new product can be used without hesitation by government
and public. Safaricoms also can try to prevent or detect from time to time threats come to
this service in daily basis.
Secondly, Safaricoms are advisable to create and maintain corporate commitment to
attract investor to put more capital to this mobile money services with other region out of
national boundaries. In order to market this services, Safaricoms must plan strategies to
establish relationship and getting trust so that the number of agent provider can be increase
so that happen network within every region of the world with mobile money banking. So,
they need to pay close attention to manage the agent network to make sure strategies can
run smoothly.

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Lastly, Safaricoms need to create more compelling product offer or expand their
application so that user can have more benefits in just a few minutes. Increase multiple
services offering such as top-ups application and mobile health. This multiple services can
gives benefits to both service provider and user because top-up and health care is one of
their great concern. Mobile phones need credit if the applications want to be used. It is
recommended to Safaricoms put real concern in top-up services provider before come up
with new application.

QUESTION
4.1 Dynamism creates opportunity as well as constraints.

Identify the most promising

opportunities as well as constraints for mobile money service providers in developed markets.
Then, do the same for firms in developing markets. How are they similar? How do they differ?

In the developed countries such as Denmark, Japan, Germany, and Sweden, there are
extensive accesses.

Besides that, there also diverse options, high sophistication and far

reaching regulations that make a different industry context typically found in developing
countries. The developed countries virtually all adults report having a formal bank account. In
the developing countries such as Democratic Republic Congo, Guinea, and Niger, less than 5
percent of the adult population reports owning a bank account. Consequently, the vast majority
of people in developed countries have little need for mobile money that correspondingly, its use
is trivial there.

The use of mobile money in developing markets differs dramatically from developed
markets. The first reason is because mobile money can operate outside the structure of the
formal financial sector. For example in Somalia, a country that mightily struggles to sustain a
legitimate government, a third of adults used mobile money in 2012. More generally, more than
a third of mobile money users in the 10 economies with the highest reported use of mobile
payments are not part of the formal financial system. The constraint us operating beyond the
purview of regulatory agencies and authorities reduces barriers to entry and mobility in the
mobile payment industry.

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Second reason that make developing markets differ from developed markets is mobile
money is a powerful substitute for conventional alternatives. M-Pesa for example, is the mobilephone based money transfer and micro financing service run by Safaricom. Many regard Mpesa as the best performing mobile payment system in the world. It enables users with a
national ID or passport to deposit, withdraw, and transfer money through a mobile device via a
network of agents that the latter are extraordinarily diverse, with some operating out of a
makeshift street stall, others running from a small visit a branch or ATM to access n expanding
range of financial services, encourages the idea of branchless banking and endorses its
disruptive implications to the historic structure of financial services.
But In Kenya, for example M-Pesa is the default bank account and debit card. This is
because more than 90 percent of Kenyas adult have an M-Pesa account and 70 percent
regularly use mobile money consequently, the case equivalent of about one-third of Kenyas
GDP passes through the circuits of M-Pesa. Safaricom charges users a small fee for each
transaction because Safaricom is a mobile network operator. The constraint of this system is a
group of traditional Kenyan banks lobbied the Kenyan finance minister to audit M-Pesa in an
effort to slow of not stop the M-Pesa. Instead, the ploy backfired as the audit confirmed MPesas robustness. The growing use of mobile money attracts increasing government attention,
concern about potential criminality calls for vigilant regulators.

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4.2 Looking out over the decade, forecast the likely standards of value creation in the mobile
money industry. How would you advise a company like Deutsche Bank or Visa to configure and
coordinate its value chain to prosper in this environment? Would you advise the same to
companies like IBM, Google, or Safaricom?

Looking out over the decade, we can see that nowadays is the trends of mobile money
industry. In using the mobile money we only need to have mobile devices and the SIM card. For
the consumer and user of mobile money, no need for them to go to the bank and make the
formal account bank in order to get the services of mobile money. For the people at Kenya over
70% of households in Kenya and more importantly over 50% of the poor, unbanked and rural
populations use the service (10 Things You Thought You Knew about M-PESA, 2010). It shows
that the mobile money service has manipulated all people in Kenya to use their services
whereby the poor and unbanked people also can have mobile money transaction.
For the bigger company like Deutsche Bank and Visa, in configure and coordinate its
value chain to prosper in this environment are they need to have planning regarding the mobile
money services whereby this services can penetrate market worldwide. Those company need to
come out with the strategy that can secure them as the global company in giving the banker
services for worldwide customer. Somehow people will put more trust if the services of mobile
money are providing by the trustworthy company in the financial sector like Deutsche Bank and
Visa. This companies need to be ready to the globalization of the mobile money to the world.
The companies like IBM, Google and Safaricom in terms of mobile money industry, for
the Safaricom they need to upgrade their services given whereby for now their services only at
Kenya and a few others countries that they have penetrate the market. In going global business,
their services offer must be more effective and efficiency in term of their privacy, data using and
the limit of transaction also should be upgrade. It is because in going global, there will be a
users that requires a lot of transaction per day.
IBM and Google companies in adapting the mobile money industry they should be aware
of current world situation whether they need to make a modification toward their overall
business or not. Companies like Google and IBM can make collaboration with the mobile money
company whereby they also need to have internet access to make transaction in mobile money.
This strategy can be suitable for the mobile money in globalization their service to the world.

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What sort of executive perspectives do you see as critical to identify and understand the opportunity of
mobile money in emerging markets? Will the same set apply to executive working in established
countries?

Executive perspectives that we can see as critical but yet to understand more in
order to identify is there are more than billion people in emerging and developing
markets have cell phones but no bank accounts. Many low-income people store and
transfer money using informal networks, but these have high transaction costs and are
prone to theft. This mobile money transfer is beginning to fill this gap by offering
financial services over mobile phones, from simple person-to-person transfers to more
complex banking services.
But, there are some perspective that is critical to identify whether it is a barrier or
opportunity itself. Firstly is lack adoption and implementation of mobile money transfer
among users that still not in the same level with the current choice and value for
consumers. This mobile money is limited in investment, operation ability and also
capacity. It was better if Safaricoms should take part of role in promoting operation
ability between different mobile money service providers in order to provide increase
choice and value for consumers. It may cost short term cost to service provider and also
consumer but this thing will surely turn out well.
Secondly, barriers to integration and cooperation with the banking sector
It was remarked than in many instances telecommunications companies are not the
main barrier to the deployment of mobile money services. These banks are often slow
to embrace these services that involving technology. Part of the reason for this is that
banks need to ensure they are compliant with fraud and security regulations. In addition
banks will often be operating older legacy IT systems which are not compatible with
more modern application programmed they often used.
This developing markets or emerging markets has several very unique
opportunities. And in some way, emerging markets may have the greatest upside in the
future. There are several reason for this. First, emerging marketing are emerging. This
is to say that these countries are rising. They are now becoming consumer, which
means there is a huge internal market. For example, think of tourism in China by the

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Chinese. As the Chinese become wealthier, their own people will want to visit their
major cities. This market will be huge in every way.
Second, emerging markets can get investments from more advanced economies and
form profitable partnerships. Thirdly, may emerging economies have lot of natural
resources. For example, some of the countries in South America have the greatest
amount of resources like copper. The world will need copy to continue to build and so
they will need more copper. So, if these countries monetize these commodities, they will
be very profitable.
In our opinion, the same set still can be applied to established countries, but yet head
quarters of mobile services provider need to innovate more multi application that suit
with local taste of consumer preferences and comfortable to use in emerging countries.
Beside that, Safaricoms need to manage their management to make sure agent
services provider can market well and get in touch with every consumer to get better
feedback and renovate more new product application on this M-PESA.

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Question 4
In a long-run, do you anticipate a few global players applying an integrated strategy across multimarkets or many national companies emphasizing local adaptation to create more value in the
mobile industry? Identify technology trends, business practices, and regulatory conditions that
support your choice.
In our opinion, we estimated few global players applying an integrated strategy across multimarkets in a long run.

The technology trends.

In the last dozen years mobile technology has flourished throughout the developing world faster
than any other technology in history. With that growth comes an equally impressive surge of
messaging services, providing not just a broadly used means of personal communications, but
also a number of valuable information services, from agricultural data reports to healthcare
reminders. The latest phenomenon spawned by mobile technology is mobile money. This trend is
providing money transfer services to millions of previously under-served people in the
developing world, allowing them to safely send money and pay bills for the first time without
having to rely exclusively on cash.The global leader in mobile money is Kenya, where mobile
network operator Safaricom launched M-Pesa in 2007.

Less than five years after launch, there are approximately 16 million users of mobile money in
Kenya, conducting over 2 million transactions every day. M-Pesa is not only being used for
standard money transfers and airtime purchase, but also to pay salaries, utility and other bills,
and to buy goods and services at both online and physical merchants. Three other mobile
operators have also begun to offer mobile money services in Kenya Airtel, Orange, and Essar
(Yu) and other players have recently emerged to offer complementary services. In addition,
many aid donors and their implementing partners have already begun to integrate mobile money
into their programs and are at the forefront of this learning opportunity
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The business practices

GSMA (Groupe Speciale Mobile Association) members lead the operations of more than 65% of
the existing mobile money services, and the vast majority of those that have achieved scale. The
GSMA and its members have prioritized the development of this initiative aimed at ensuring that
all mobile money providers are offering sound and secure services and treating customers fairly.
As the industry grows, the Code of Conduct will support the consistent development of safe and
responsible digital financial services.

The Code of Conduct addresses protection of customer funds, mitigation of risk of money
laundering and the financing of terrorism, reliability and trustworthiness of mobile money,
reliability of the channel and service performance, security of the network and channel, and fair
treatment of customers, including disclosure regimes, effective customer complaint redress
procedures, and protection of customers sensitive data and personal information.

By establishing minimum requirements that all providers must meet with respect to their
customers, the Code of Conduct will ensure that customers are treated fairly and that customer
funds are safe. These measures, applied consistently by all providers, will ensure high quality of
services and contribute to customer confidence in mobile money services and in the broader
digital ecosystem.

Mobile money providers that have endorsed the Code of Conduct are committing to implement
practices that will ensure that mobile money services are safe, reliable, and fair to customers.
These commitments will contribute to the development of digital financial ecosystems and
accelerate financial inclusion by:

Assuring customers that they will be treated fairly and that their funds are safe

Harmonizing business and risk mitigation practices, thereby facilitating the

implementation of interoperability initiatives

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Building trust with regulators and policymakers, which will foster the development of a
competitive and level playing field for mobile money services

Giving other actors in the public and private sector the confidence to collaborate with and
connect to mobile money providers. Is endorsement of the Code of Conduct mandatory
for GSMA members

Endorsement of the Code of Conduct is voluntary. However, the GSMA strongly encourages all
members offering mobile money services to endorse the Code and commit to the implementation
of its principles. The GSMA is working closely with members and expert organizations to
develop recommended business practices to provide guidance on how groups and country-level
mobile money providers can effectively operationalize the principles that underlie the Code. In
the future, the GSMA and the providers participating in the initiative will work to develop first a
self-assessment process and then a robust certification regime for verifying compliance with the
Code of Conduct.
Mobile money regulatory conditions

One of the benefits of mobile money accounts is that customers typically are permitted to store
funds on an electronic wallet, thus providing customers with access to a mechanism for safe
storage of funds that can be used for payments and transfers. Confidence in mobile money
services depends largely on adequate protection of customer funds held by the provider. Clear
and simple rules applied to non-bank mobile money providers have been introduced in various
countries to effectively ensure availability of funds for redemption.
Customer protection measures begin with safeguarding funds in one or more banks (protection
and diversification), imposing restrictions on its use by the provider, and isolating funds from
institutional risks to ensure that funds are available when customers want to redeem them against
electronic value. In the event of provider insolvency, the regulator can also detail clear
procedures for reimbursement of customer funds.

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The risk of mobile money customers losing the money that they have stored in the system is
mitigated if:

100% of the cash backing mobile money is held in a fully prudentially regulated institution,
such as a bank or an MFI (Monetary Financial Institution), or in more than one institution
(depending on the stage of development of the deployment)

the non-bank mobile money provider does not intermediate the funds

Customer funds are isolated from the issuers funds and protected from claims by the issuers
creditors.

From the perspective of mobile money services, the beneficiaries lack of an equitable interest in
the trust property under civil law creates particular challenges in the event of an e-money issuers
insolvency. Under common law, funds held in trust are ringfenced and protected from creditors
of the trustee in the event that a trustee becomes insolvent. Most civil law arrangements do not
offer the same protection, thereby increasing the risk that e-money accountholders would receive
less than 100% of the value of their e-money in the event of an issuers insolvency. To some
extent, this risk can be addressed by requiring the manager (1) to sign a contract agreeing to
ringfence the assets; and (2) to identify ringfenced assets in any other contract that the manager
signs with an outside creditor. In practice, however, this risk has proven to be significant enough
that in general, the choice of managers for trusts in civil law countries whether related to emoney or otherwise typically is limited to banks or other institutions perceived as presenting a
low risk of insolvency.
The greater risk posed in the event of an issuers insolvency in civil law countries has led
regulators to adopt different approaches to this issue in common law and civil law jurisdictions.
In common law countries such as Kenya, for example, the regulator only needs to satisfy itself
that the instruments of trust governing outstanding e-money funds are adequate. In contrast,
certain civil law countries have taken steps to codify the ring-fencing provisions within the law
itself.

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