Everyone knows about the success of Safaricom’s M-Pesa mobile money service. Yet Money, Real Quick: The story of M-PESA by Tonny Omwansa and Nicholas Sullivan still adds some insights to a subject that has already been much written about. Partly the book succeeds because it explains thoroughly but accessibly how the service managed to grow so fast in its home market.
For instance the book spells out the central role of agents in building the business but also the challenges they face depending on their locations. Those in rural areas need to maintain a relatively high supply of cash as remittances tend to be transferred from city to countryside. Their urban cousins need to tack in the opposite direction and maintain a relatively high electronic float as subscribers convert cash into electronic payments that can be sent to the countryside (the only time this trend reversed was during Kenya’s violent political crisis in 2008).
Another interesting observation is that agents flourish when the mobile operator runs a predominately cash-in/cash-out system, with subscribers either paying in or taking money out of the system. However when subscribers start to shift their electronic spend to physical goods (rather than electronic transfer) then retailers such as supermarkets come to the fore at the expense of agents.
A second reason that the book is an enjoyable read becomes clear from its acknowledgements, which explains the book’s mandate was to write “a journalistic, narrative-driven” focus on the subject. A secondary consideration was to show how ubiquitous mobile penetration offers the potential for financial innovation in developing countries. That ordering of priorities makes for a story that moves quickly and avoids becoming bogged down by driving the story forward through the words of those individuals who were either behind the service or have benefited from its take-up.
The book was funded by The Rockefeller Foundation through a grant paid to the GSMA which project managed its production and liaised with the two authors.
When the first pilot of M-Pesa started in October 2005, Safaricom envisaged its target market would be middle-income earners. In fact its biggest impact has been among the poorest people in the country. Nearly half of those in the lowest income quintile of Kenya’s population now use the service. And nearly half are women. These people do shift a lot of cash via the service: There are more daily M-Pesa transactions in Kenya than Western Union carries out globally. And 60 percent of the country’s total electronic transactions move via the system. But they are not worth much financially. M-Pesa transactions represent just 2.5 percent of the value of the country's total. In other words, the poor generate high volumes of transactions but their value is small in financial terms.
However the book argues we should not mistake this activity for financial inclusion of the poorest. While it says more people now have access to more and better financial services, it has a reservation: “That said, M-Pesa and mobile money do not equate to financial inclusion and won’t until new services are created, prices drop, and interoperability between mobile money players and banks is a seamless reality”. Interoperability is a key issue in a market dominated by one competitor.
But M-Pesa does open up the possibilities for new services. The authors liken its role to that of the iPhone in more developed markets where Apple's prodcut has spawned a secondary market of apps developers. Many engineers have left Safaricom for their own start-ups. Using the M-Pesa platform, start-ups can offer mobile payment services for everything from schools fees to water pumps to charitable donations.
While M-Pesa has open arms for businesses in search of a platform, it is not so welcoming to its rivals. The book lays out the classic interoperability arguments: How even in Kenya interconnecting with rivals might enable mobile money services to grow faster. The converse argument of course is why should Safaricom, which built the market from scratch, offer rivals a piggyback to success?
Finally M-Pesa offers an exceptional example which makes for an inspiring story but it is also a warning, and a challenge, to the mobile industry. There are no other mobile money services around the world with a comparable adoption rate. This failure is much mulled over in the mobile industry. The industry can certainly put aside the complacency that M-Pesa’s success can be easily reproduced elsewhere. The authors urge patience. Credit cards were introduced in the developed world in the 1950s but did not reach critical mass until the 1980s. It’s worth bearing in mind that one in two mobile money users in the world is a Kenyan. That rightly is an enormous source of national pride. But for the rest of the mobile industry that should be a statistic they want to rebalance. For more about Money, Real Quick; The story of M-Pesa, see here.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.