It is fair to say that Kenyan mobile
payments service M-Pesa has rocked the industry. The country’s
banking industry has looked on helplessly as it has developed
services for the unbanked, and grown impressively in scope in the
little time since its launch. Sammy Olumola looks at the service’s
impact
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Since its launch nearly half a decade ago,
Safaricom’s now famous mobile money transfer service M-Pesa (M for
mobile, Pesa, a Swahili word for money has made steady and
confident economic strides, winning business, market share, and
numerous awards.
Today, Safaricom boasts a 70% share of Kenya’s
telecoms market, thanks largely to M-Pesa’s success. The telco’s
latest annual financial report indicates that there are over 16 m
active users of M-Pesa mobile money transfer service in Kenya with
a cash flow of over KES50m ($580,000) a day. The company says that
over $650m is deposited and withdrawn every month. Calculated
annually, that is roughly equal to 10% of Kenya`s GDP. The value of
M-Pesa transactions since 2007 to March 2010 topped KES828bn (half
of the country’s GDP).
Over 70% of all households in Kenya currently
have an M-Pesa account. As part of its strategy and commitment to
capture both the low- and high- income earners, M-Pesa allows its
subscribers to send anything from KES50 ($0.5) to KES100,000
($1,000) a day.
A not insignificant element of M-Pesa’s
success was the regulatory framework it was born into – and few
analogous products have been brought to market as easily. But the
business has certainly proven that mobile payments can capture the
needs of a market, and grow from there.
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By GlobalDataRecently, M-Pesa has been extensively
integrated with a number of financial service providers to meet the
ever-growing financial needs of its customers. M-Pesa subscribers
are already able to use the service to open savings accounts at
various banks, as well as pay utility bills. In addition, the
service can be used to purchase items in shopping malls, pay school
fees, and manage the disbursement of salaries and wages to
employees. Furthermore, British Airways now allowed its customers
to pay for flights using via M-Pesa.
In 2011, the M-Pesa money transfer platform
was used to collect over KES600 m ($7 m) during the Kenyans for
Kenya campaign, an initiative that saw over 2 m people in the
hunger stricken northern-Kenya region receive food supplies, water,
medication and other basic amenities.
Not all plain sailing
Despite its success, M-Pesa has had
challenges. Safaricom continues to grapple with numerous criminal
incidents. In the last four months alone, over 15,000 incidences
have been reported, adding up to more than KES10m ($100,000) in
fraudulent transactions. Safaricom CEO, Bob Collymore says that 70%
of such crimes are committed in prison.
Criminals have been impersonating M-Pesa staff
in order to trick unsuspecting customers who end up sending money
to them in order to claim prizes in non-existent promotions.
Collymore says the company has set aside KES10m ($100,000) to help
in combating the crime – the sum defrauded from M-Pesa accounts in
the last four months of 2010.
YU Mobile and Airtel Money (formerly Zain Zap)
are the biggest competitors to M-Pesa. In 2011 YU Mobile and Airtel
Money waived their money transfer fees in a bid to increase their
market share. “Such a move is likely to result in a loss of our
market share over the next two to three years,” says Collymore,
before adding that he expects the company to remain market leaders
in the Kenyan teleco space for years to come.
“Safaricom has a very strong base with over
18m loyal customers” he says, before reiterating that his primary
focus is to continue investing in expansion of M-Pesa network
capacity to handle the ever-increasing number of subscribers and
expanding its data services in order to continue improving
efficiency.
Ambitious plans
Collymore says that Safaricom is currently
looking for a new platform which could handle more than 200
transactions per second up from the current 70. He adds that the
operator is considering shifting its systems from their current
base in Germany, back to Kenya – a move actively encouraged by the
Central Bank of Kenya.
When it comes to geographical expansion,
Tanzania, South Africa, the UK and the US are all among countries
that are now adopting the M-Pesa mobile service. In March 2011,
Safaricom signed a memorandum of understanding with Western Union
that gives it access to Western Union’s global remittance network
for receiving and transferring money cross-border.
According to a report from Business Daily, the
Kenyan diaspora remitted KES51bn ($642m) in 2010, up from KES48bn
($609m) in 2009. Discussing the deal, Michael Joseph, former CEO of
Safaricom, said that “international remittances form a significant
part of the total income for some Kenyans, and the partnership with
Western Union will provide Kenyans with an opportunity to receive
small values of cash from abroad in a fast, safe and affordable
way.”
A recent report from International Monetary
Fund ranked M-Pesa ahead of Western Union in terms of transaction
volumes, indicating that M-Pesa was executing more transactions
domestically than Western Union was globally.
As mobile payments steadily start to take off
in other emerging and developing countries around the world, more
and more companies, new and established, will look at M-Pesa to
learn how to generate revenues from offering financial services to
a consumer segment that in traditional banking terms is
unprofitable.
