The network was part of the product
M-Pesa made a phone number a practical destination for money. Customers could turn cash into electronic value through the service and send that value to another M-Pesa user, who could later use it or cash it out. But the reach of a transfer depended on the recipient’s mobile network: a phone number on a rival carrier was outside M-Pesa’s system.
That boundary was more than a technical inconvenience. Mobile money becomes more useful as more people can receive it. If a customer’s family, shop, or employer was already on M-Pesa, staying with Safaricom made transfers easier. Each new user therefore strengthened the service’s appeal to others—a network effect that could help the leading platform pull further ahead.
A fence that favored the incumbent
Keeping transfers inside one system also gave Safaricom a commercial advantage. Users had a reason to choose its network, and rivals could not offer their customers a direct path into the largest pool of mobile-money users. A person who wanted to pay across networks might have to find another way to move the money or persuade the recipient to switch.
The problem was that the phone networks served the same public, while their payment systems did not connect. What looked like a simple transfer to a customer required a bridge between separate companies’ systems and rules. Without that connection, competition in mobile service did not automatically give people freedom to send mobile money across carriers.
Connecting the systems changed the choice
Regulators eventually required networks to connect, making cross-network transfers possible rather than leaving each service as a separate island. Interoperability—systems’ ability to exchange transactions—meant a customer’s choice of mobile carrier no longer had to determine whom they could pay through mobile money.
The change did not erase M-Pesa’s existing users or make every service identical. It changed the competitive boundary: rivals could reach customers without first building a closed network of their own, and customers gained more freedom to choose a carrier without cutting off payments to people elsewhere. The fence had helped make M-Pesa powerful; connecting the networks made that power less dependent on keeping users inside it.
