During Afrikoin, the first mobile money and digital currency conference held in Nairobi, I met with Brian Muthiora. Brian joined the local branch of GSMA, the global association for mobile operators, after 5 years at Safaricom handling the regulation issues for MPesa, the mobile money system designed by the Kenyan telco. Over an hour, I had the chance to hear about the story of MPesa told by an insider.
MPesa remains slightly mysterious. It’s undoubtedly a hit in the mobile money business, with €12bn exchanged over the last 5 years, but yet it has not left Kenya. Even nearby Tanzania, which shares some of Kenya’s ethnicities, cultural practices and economy, doesn’t use MPesa. The research for MPesa’s success is still ongoing, but the following points could help shed some light.
- MPesa was designed and rolled out by Safaricom, the dominant telecom operator in Kenya with almost 80% market share. Any innovation from such a giant in the industry can be easily promoted to a huge user base. However, as Mbwana Alliy from the Savannah Fund and Brian from GSMA are quick to note, other countries with dominant operators have attempted similar technologies but have not done nearly as well, so this can’t stand as the main factor behind MPesa’s success.
- Safaricom proved to be a clever product designer, especially in the user experience field. In the early days, MPesa was thought of as a way for groups of women (known as chama) to pay for their laundry service on a monthly basis. The women in each test group began to use the service to send and receive money between each other. As a telecom operator making money on each transaction, it was obvious than making MPesa a mobile money service was more profitable than a monthly laundry payment service.
- The training Safaricom gave its teams to operate this new service also proved critical. Instead of using uninformed and dispassionate sales teams to promote MPesa, a separate branch was set up to build, sell and operate MPesa within Safaricom. Silo work is not popular in the digital age, but for once, it proved useful as the technical experts were able to sell the product more effectively.
- Safaricom then had to create a network of agents. Before MPesa, it was already possible to buy and sell airtime as a virtual currency. Agents were buying wholesale airtime and they made comfortable margins with little interaction with end users. MPesa would not be a good deal for them: too many contact points with customers and less value on each of these transactions. So Safaricom turned to the kiosks, which are small convenience shops selling cigarettes, fruits and basic products across Kenya. These agents were offered an additional source of revenue (taking a cut on each transaction) and an IT system to administer the mobile money, without which the reliability of each agent would not have been so solid.
- The marketing of the solution also proved clever, centred on one promise: “Send money home”. Brian remembers the first time he used MPesa: “My mom told me she had a fundraising for our church back in the countryside, so she expected me to take some time during my day at the office to do the transaction, but I could now do it with a simple message, without leaving my office”. If Safaricom thought the main use would be urban workers sending money back home to their families, they quickly saw a boom in inter-rural transactions. The typical property in rural Kenya consists of a small shack and a big chunk of land on which to grow vegetables, fruits and a few animals. Daily transactions of these goods between neighbours was drastically improved with MPesa.
Initially, what was a P2P service for families and neighbors (with features such as sending money, receiving money or buying airtime), turned into a payment service with features to pay bills and buy goods. The government vision for the next few years is to have all transactions done electronically, including the tax/bills/fines/benefits between the administration and the citizens. MPesa may not be the ideal candidate: it’s perceived primarily as a payment option for daily transactions rather than larger, more significant ones. Also, as most taxpayers have a bank account, transfers and credit/debit card payment is on the rise too.
The future of mobile money with MPesa is all but certain. Afrikoin panelists all wanted their share of the cake, from credit cards (VISA) to Bitcoins (BitPesa or Kipochi) and to the aggregators of payment systems.
One thing is for sure; mobile money will continue to innovate in Kenya, now that the competition between banks and telcos (and, to a lesser extent, startups) is set. It’s harder to see how European and American markets can follow suit, especially with a banking industry holding much vested interest and little competition to the significant players like Paypal and other payment services.
Note: If you’re interested in MPesa, you should also read Money, Real Quick by Tonny K. Omwansa.