Understanding the diffusion and adoption of digital finance innovation in emerging economies: M-Pesa money mobile transfer service in Kenya

The growth of digital financial innovations in emerging economies varies across countries with Kenya’s mobile money transactions leading in Africa. Empirical evidence is lacking to describe from a system perspective the major factors attributing to this. Among the major money mobile transfer innovations, M-Pesa has recorded a tremendous impact since its launch in 2007. Consequently, this paper uses M-Pesa as a case study to understand the determinants of the success of digital financial innovations in an emerging economy. The analysis is applied at the level of technological innovation system (TIS), a framework that has provided useful insights into the functions that need to be stimulated for the successful deployment of innovative technologies. The analysis exposes key systemic functions that characterize M-Pesa rapid diffusion in Kenya. The study finds that TIS framework can be applied to explain the diffusion and uptake of a new technology. However, local adaptation process attracts critical coordination aspects, significant learning and localized capabilities attributed to M-Pesa rapid expansion. These aspects are not explicitly articulated in the TIS literature. The study concludes with policy recommendations towards stimulation of key functions that may support diffusion of digital financial innovations in emerging economies.