During Afrikoin, the first mobile money and digital currency held in Nairobi, I’ve met with Brian Muthiora. Brian joined the local branch of GSMA, the telecom operators professional association, after 5 years at Safaricom handling the regulation issues for MPesa, the mobile money system designed by the Kenyan telco. And during an hour or so, I had the opportunity to have a history of MPesa told by an insider.
MPesa remains a bit mysterious. It’s a sure hit in mobile money, with â‚¬12bn exchanged over the last 5 years, but only in Kenya. Even nearby Tanzania, which share some of Kenya’s ethnies, cultural practices and economy, doesn’t pay in MPesa. The research for MPesa’s success is still ongoing, but a few explanations can already help understand it better:
- MPesa has been designed and rolled out by Safaricom, the dominant telecom operator in Kenya, with almost 80% market share.Â Any innovation of feature can then be promoted to a huge user base. But, as Mbwana Alliy from the Savannah Fund and Brian from GSMA add rapidly, other countries with dominant operators have not done so 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 cooperatives of women (known as chama) to pay for the 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.
- Then, the support of Safaricom to train its teams to this new service proved critical. Rather than a top-down innovation that sales people have to try to sell with little knowledge or conviction about it, a separate branch was set up to build, sell and operate MPesa within Safaricom. Silo work is not so popular in the digital age, but for once, it proved useful as usually, the telco world reacts poorly to innovation.
- Safaricom had then 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 could not be a good deal for them: too many contact points with customers and less value on each of this transaction. So Safaricom turned to the kiosks, which are small convenience shops selling cigarettes, fruits and basic products a bit everywhere in Kenya. These agents were offered an additional source of revenue (taking a cut on each transaction) and also an IT system of administration of the mobile money, without which the reliability of each agent couldn’t have been so solid.
The marketing of the solution also proved clever, with 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 back money 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 which serves to grow veggies, fruits and a few animals. Neighbour to neighbour daily commerce of these goods was soon better done with MPesa.
Initially, what was a P2P service for families and neighbors (with features such as send money, receive money or buy airtime), turned into payment serviceÂ 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/fine/benefits between the administration and the citizens. MPesa may not be the ideal candidate: it’s mostly perceived as a payment option for daily transactions rather than “serious” payments. And 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 VISA with credit cards to BitPesa or Kipochi with Bitcoins up to the aggregators of payment systems.
A sure thing: mobile money will happen and continue to innovate in Kenya, now that the competition between banks and telco (and, to a lesser extent, startups) is set. It’s harder to see how European and American markets can follow suit, with a banking industry acting as a vested interest and for now, little competition to the legitimate players, including Paypal and other payment services.
If you’re interested in MPesa, you should also read Money, Real Quick byÂ Tonny K. Omwansa.