Kenya has made impressive strides in overall financial inclusion over the last five years, thanks to the launch of the M-PESA mobile money transfer service by Safaricom Ltd.

M-PESA has within the same period opened the eyes of the world to the potential of mobile money and mobile payments, creating what would easily pass as a financial services revolution.

In the face of a multipronged onslaught from Kenyan Banks, M-PESA is not done proving its worth as the leader and innovator in offering mobile phone-based financial services.

M-PESA had at launch secured the full backing of the banking industry regulator in Kenya, the CBK, with its promise to deepen access to financial services in Kenya. While the delivery of M-PESA initially relied on Safaricom’s dealer network, and later independent M-PESA agent networks, banks in Kenya moved to embrace M-PESA, if only to gain access to Safaricom’s ever-widening subscriber base, a good percentage of whom were using M-PESA to conveniently perform financial transactions.

It is now clearly emerging as no secret that while banks started to embrace M-PESA in 2009, integrating their services with the former, they had their product development teams working overtime to develop mobile banking and mobile money platforms of their own, several of which have been launched this year.

Prior to this, when Kenyan banks woke up to the realization that M-PESA’s strength was in its ubiquitous agent network offering cash-in/cash-out services, they moved to develop partnerships with retail outlets in an agency banking model approved and passed by the CBK in 2010. In what can be seen as good business foresight, M-PESA had made its agency contract with M-PESA agents exclusive, meaning M-PESA agents were off limits to banks as agency banking outlets.

Equity Bank, as the largest bank in Kenya by customer base, came close to unlocking this exclusivity when it partnered with Safaricom to launch M-KESHO in 2010. M-KESHO is a service that allows deposits to, and withdrawals from, one’s Equity bank account through selected M-PESA agents and through the M-PESA menu. M-KESHO reached over 600,000 customers in a record 3 months, but unresolved teething pains prevented M-KESHO from replicating M-PESA’s viral success.

While agency banking was instrumental in spreading banking services, the convenience of having one’s money secured in a mobile phone 24 hours a day still gave M-PESA, and other mobile money transfer services that followed a big advantage.

KCB, the biggest bank in Kenya by asset base, unveiled a revamped mobile banking product dubbed MOBI-BANK in May 2012. Open to all mobile networks, KCB’S MOBI-BANK bears all the hallmarks of a superior mobile banking service: accessible via the mobile web with users able to send money directly from their bank accounts to any mobile number in Kenya, airtime top-up to all four operators, and able to make payments directly from bank accounts.

This service design could have been informed by the fact that subscribers who initiate mobile money transfers already hold bank accounts, being the working class. But cutting out the need for banked customers to walk into a bank branch or ATM to withdraw cash before depositing it into a mobile money account is by no means a winner for bank-based money transfer services. While this could present a headache to M-PESA and other mobile network-operated money transfer services, the fact than banks still have to offer these services through the mobile phones of network operators may offers just a little bit of comfort.

To cement M-PESA’s position as a nimble mobile financial services platform with direct access to 15 million Kenyans — more than the total combined number of bank customers in Kenya — Safaricom partnered with M-KOPA Kenya Ltd in October 2012 to launch a credit sale, pay-as-you-go solar lighting solution. Targeted at the low-income segment, which would otherwise not access the same credit line from banks, this service, dubbed M-KOPA, provides a flexible, affordable financing plan through the M-PESA platform for ordinary people to own assets that are basic and essential in their lives.

Hot on the heels of M-KOPA, Safaricom launched M-Shwari in November 2012, a revolutionary banking service for its M-PESA customers in partnership with Commercial Bank of Africa. (CBA has held the M-PESA money transfer trust account since its inception and is the major channel through which agents replenish their e-money reserves.)

M-Shwari allows customers to save and borrow money through the mobile phone while at the same time earning interest on the money saved. The service is paperless and eliminates visits to a bank branch. All an M-PESA customer needs to do is update their M-PESA menu with a simple click and they have a savings account. Movement of money between M-PESA and the savings account is at no charge, no ledger fees are applicable and savings are as little as Kshs 1.

Emergency loans at 7.5 percent interest processed and accessed via the mobile phone with M-Shwari are a clear demonstration of Safaricom’s insatiable appetite to broaden its financial services offering. It also leaves predatory lenders who lend emergency loans at 30 percent interest with personal possessions as collateral and punitive penalties in a precarious position.

As can be imagined, this has also sent banks straight back to the drawing board in their quest for retail clients. It is interesting to watch this scenario unfold as banks and M-PESA, partners by convenience, try to outwit each other in the mobile financial services space.

As of now, I will give it to M-PESA.

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