How many people are using your mobile payment service M-Pesa?
Presently, M-Pesa has slightly over 16 million customers and the largest agent network of any corporate organization, which stands at more than 60,000 agents. Since its inception in 2005, the service has moved more than 2.3 trillion Kenyan shillings (21 billion euros). Today, M-Pesa services 2 million cash transactions valued at Kshs 2 billion (18 million euro) which rise to 6 million transactions when one includes airtime transactions.
Why is it so critical to build a huge agent network to launch a retail financial product such as M-Pesa? As a telecom operator, do you consider that you had an advantage, compared to banks in particular?
The exponential growth of our agent network can mainly be attributed to the fact that the original agent outlets were mainly set up by people who already had existing businesses and M-Pesa was an addition to their business hence benefited from existing cash flows. The success of M-Pesa, and indeed the Safaricom brand as a whole, is anchored on its vast countrywide dealer network, the largest of any corporate organization in Kenya. Safaricom’s agent roll out was made simpler by the presence of already existing dealer outlets who use to perform Safaricom related services such as airtime sales. They were the first point of contact for M-Pesa and from here, it was easy to roll out.
Kenya, although very much a global trendsetter on the digital space, is still very much a society heavily reliant on human contact, both from a cultural and practical perspective. Our dealer network therefore acts as the point of contact for customer to perform other related M-Pesa services as well as to receive assistance. For instance, the initial part of M-Pesa registration process is a manual process requiring a human interface, because it involves the filling in of hardcopy forms and the presentation of identification. From a marketing perspective, our agent outlets increase visibility for our brand. The agent network also serves an important component of growing our brand footprint: it is an avenue for communication and feedback to improve our products to the customer. In addition, our agent network is a source of job creation.
The Know Your Customer (KYC) requirements can be an obstacle to convince unbanked clients to subscribe to the service. What do you do regarding that?
M-Pesa KYC is driven by identification documents. For one to be registered as an M-Pesa customer, it is imperative that they present specific identification documents (National ID, passport, Military ID, Alien ID) for them to register and to transact at any agent outlet. Indeed, M-Pesa registration is relatively easy to navigate and it doesn’t differ too much from that required for the registration of mobile phone lines. Given that an ID is a requirement for proof of nationality for those over 18 years of age, most Kenyans have access to one.
Customers are aware of this through all marketing communication that has been in place since launch. In addition, agents are trained to ensure they do not transact for customers without ID and they are aware of the penalties in place if they do. This is supported by the presence of posters and stickers in agent outlets that remind customers that they must have their original ID documents to transact.
The registration process is an integral element of our security procedures. Last year alone, M-Pesa moved more than one third of Kenya’s GDP and given the integral role that the service plays in the country’s economy, it is paramount that we guarantee the security of the service to our customers and other stakeholders. M-Pesa has become a key pillar of the national payments system and therefore these requirements ensure that we are in compliance with government rules and regulations around anti money laundering.
Abroad, M-Pesa is mostly known as a customer to customer payment system. But you have also developed bulk payments. Why? Does it work?
Constant innovation and evolution are the homestay of any successful brand. When M-Pesa was launched, it started off as a peer to peer money transfer platform. The twin elements of convenience and security propelled M-Pesa to great success driven primarily by the ubiquity of the mobile phone in Kenya. This is the foundation that lays the ground for the various developments that the platform has undergone; subsequently positioning M-Pesa at the head of the cashless society/mobile wallet agendas.
Today, customers can perform bulk payments, pay their bills, buy goods and pay for their meals using M-Pesa. At present, we have about 4,000 paybill merchants and 1,600 firms using M-Pesa for the utility payments. One of the reasons more and more clients are favouring M-Pesa as a payment mode is because:
- The virtual nature of M-Pesa makes it a more secure mode of payment unlike cash which is prone to human interceptions;
- M-Pesa makes cash handling cheaper and hassle-free;
- M-Pesa is convenient: mobile phones are readily available and M-Pesa is literally “money at the touch of a button”;
- By interlinking M-Pesa to bank accounts, customers have access to a variety of sources using one platform: the mobile phone;
- More Kenyans own a mobile phone than own a bank account. And so, whereas in the Western world bank cards are used more, here, the mobile phone is the main driver of the financial inclusion agenda.
To what extent can we say that M-Pesa contribute to financial inclusion of unbanked population? Why are you willing to create bank accounts linked to the M-Pesa accounts of your customers?
In Kenya, an estimated 10 million adults, more than half the adult population, have no access to formal financial services yet they account for an estimated Kshs. 200 billion (1.8 million euros). This money is usually kept in unsafe places such as under mattresses and in locked boxes which is at the very core, an unsafe mode of saving. Further, by being out of circulation, this money is of no value to the economy, both at the micro and macro levels.
Safaricom & Commercial Bank of Africa (CBA) responded to this need by launching M-Shwari; a product that affords Safaricom customers an chance to save and borrow money through the M-Pesa platform. M-Pesa has slightly more than 16 million customers, 60% of whom are unbanked. By having access to a bank account via the phone, we have the ability to reach majority of customers who have mobile phones but have no bank account and provide them with access to formal financial services.
What is the difference between M-Kesho launched in partnership with Equity Bank and M-Shwari launched with CBA (see box)?
M-Kesho and M-Shwari are both products that offer formal financial services to customers on the mobile phone.
Do you have other partnerships with banks?
We have partnerships with over 137 financial institutions in Kenya. The range of product offering includes super agency, mobile banking, agent services, ATM services among others.
What are the services offered by M-Shwari and how many users have subscribed since November?
M-Shwari is a bank account offered by CBA for M-Pesa customers. It is accessible via the phone and provides customers with access to micro-savings and microcredit services. To-date we have over 2.5 million customers on board.
As regards the credit part, how does the scoring work? What rate of loan repayment have you reached since the launch?
We cannot share the credit scoring as well as loan repayments as it is confidential.
What are your expectations regarding the savings? Do you plan to encourage longer term savings?
We expect customers to continue saving with this product. As stated in an earlier response, a huge section of the Kenyan population remains unbanked for whatever reason – be it convenience, access or a general lack of understanding of how financial institutions work. M-Shwari provides convenience – easy registration, easy deposit and easy withdrawal of money. Most importantly, it provides customers with dignity. Many customers feel uncomfortable walking into banking halls due to their profile or level of cash transaction. The mobile phone somehow addresses these concerns and we are seeing a consistent uptake of the product which currently stands at 20,000 new registrations a day.
Our communication encourages customers to save frequently and to retain their money in M-Shwari longer through the provision of competitive interest rates.
