MMT Explained, part 10: behind the scenes at M-PESA - in conversation with Michael
"We have 6.5 million people signed up but to me, that is not the measure of
success... The key question is, how many transactions are you processing per day?
That is the key metric from a mobile operator point of view - are people using it?" -
Michael Joseph
Launched in March 2007, Safaricom's mobile money
service M-PESA now has over 7,000 agents (in a country
with a total of 750 bank branches). M-PESA was named
"Best Mobile Money Service" by the GSMA at this year's
Global Mobile Awards. For Safaricom CEO Michael Joseph,
mobile money is not about awards, it's about stickiness.
We spoke to Michael and Pauline to get behind the scenes
insights into M-PESA and to preview Michael's keynote
presentation at MMT Africa on 5 & 6 May in Johannesburg.
What are the critical success factors in driving a mobile money service like M-PESA to
critical mass?
Michael: First you need reliable technology with 100%
integrity. That has to be the basis of your product, but I think
the critical success factor to get to critical mass is you need a
dealer network that is ubiquitous across the country. Once you
start signing up customers, if they use the system, then it has
a viral marketing effect - you don't really have to advertise as
people tell one another. And the system has to work properly - you can't have customers send their
money to a remote area, only for the recipient to find there's nowhere to cash their money out.
When you talk about the importance of building out that ubiquitous agent network, can
you secure dealers in batches, or does one literally have to go village to village to identify
these informal convenience stores?
Michael: We started with a very big dealer network selling
airtime. But there aren't any short cuts here. Later on, once
they see the success of it, everybody wants to join in - new
agents will come to you. I think a lot of mobile money
programmes fail because they have the technology, but they
haven't done the hard work of getting the agents in place. You
cannot just appoint agents and leave it at that, you have to constantly review, inspect and manage
them and ensure that they are behaving as you expect in providing your service with the integrity you
expect. There a lot of challenges in mobile money services, like having enough money in the till when
people come to cash out, like ensuring agents behave with integrity - in order to make sure that
happens, you need to have a whole network of people going round ensuring that the right behavior is
being adopted and practiced by your agents. 100% integrity takes considerable effort - it takes
continuous training on the part of Pauline and her team - monitoring and being strict disciplinarians.
Please tell us a little about your award winning advertising for M-PESA. Can you tell us
about the development of that advertising, and what your messaging tells us about the
profile of the typical M-PESA user.
"the critical success factor to
get to critical mass is you need
a dealer network that is
ubiquitous across the country."
"You cannot just appoint
agents and leave it at that, you
have to constantly review,
inspect and manage them"
Michael: It took us a number of tries to get the advertising right - and Pauline is laughing next to me
because I didn't think it was the greatest advert we'd ever done, but the judges thought it was good.
We simply tried to show how M-PESA worked and that it could work in a number of different ways
and different parts of the country. We tried to show this in ways that would resonate with our
customers, show who they were, what kind of people they were, what social standing they had.
There's an M-PESA advert that I've seen on YouTube
(http://www.youtube.com/watch?v=nEZ30K5dBWU) that was focused on urban
migrants sending money back to rural areas - was that your core messaging at time of
launch?
Pauline: At launch the urban migrant messaging was used as we recognized it would resonate with
the majority of Kenyans, but it doesn't typify the profile of all our users. It was a message that was
very successful for the launch, and moving on our challenge is to encompass more types of users.
So has your marketing messaging evolved subsequently?
Pauline: Yes it has evolved since that launch messaging two years ago, we've moved on from the
message that you can send money home from urban to rural, to communicate to customers more
reasons as to why they might want to use M-PESA, even from rural to urban, and to show that our
service is applicable to you whoever you are in Kenya, whether you are banked or unbanked,
regardless of whichever socio-economic group you are in.
M-PESA has a dedicated support team of over 150; can you tell us a bit about the back
office operations and customer services behind M-PESA, and how that's been scaled up as
you've achieved the tremendous subscriber
uptake that you've enjoyed?
Michael: Back office operations are a critical success
factor. This is the developing world, and not everyone
can read, so sometimes people make mistakes and send
money to the wrong person, so we need to have back office support to assist people get the money
back where possible. We have a dedicated M-PESA call centre with its own number. We make sure we
maintain a very high quality of customer care, for example calls are answered within a certain time.
Pauline: Communication to customers is key. M-PESA is a new service and it's a financial service.
Customers have lots of queries and anyone operating a service like this needs to be prepared for that.
You'll get many queries, right down to basic customer education, so the burden upon customer
services is dependent on how easy your service is to use, how intuitive it is, how literate your target
market is.
Michael: We have 6.5 million people signed up but to me, that is not the measure of success.
Everybody will sign up if they can, particularly if the operator makes it automatic. The key question is,
how many transactions are you processing per day? That is the key metric from a mobile operator
point of view - are people using it?
The system must have integrity and so must the operator. People need to trust their mobile money
service provider. Independent researchers studied M-PESA* and found that people put faith in M-PESA
because they believe in Safaricom as a trusted brand. For example, if the system is running a little
slower, we tell our customers.
(*Michael was alluding here to Olga Morawczynski's studies, which will be presented at MMT Africa.)
Pauline: We have automated responses so that if there are system delays, we send an SMS to a
customer or an agent transacting either saying "we've accepted your request but please wait a little
bit because we're experiencing delays" or "sorry but at the moment we're not able to accept your
"Customers have lots of queries and
anyone operating a service like this
needs to be prepared for that."
request, please try later." It is about keeping the customer informed, because once they've
transacted, their expectation is a response within 30 seconds, and if that doesn't happen they start to
get worried.
Michael: We do have peak times and we do have peak days. Like any system, we sometimes have
transaction delays, particularly because the systems are so secure, so you can't tweak things to make
it go a little faster. Our system capacities are very carefully planned and managed.
I wanted to go back to Michael's point about transaction volumes being the key metric,
because Michael said in his keynote address at our MMT Global Summit last year that the
strategic importance of M-PESA to Safaricom is as a loyalty platform, more than in terms
of impact on RPU - could you expand on that?
Michael: In the beginning it was much more important,
because nobody else had M-PESA. Now more operators are
launching and seemingly everyone has money transfer. The
importance here is the stickiness to the product - if you're
an M-PESA customer you don't really want to start all over again with another operator.
The other thing is that you are offering the customer a service which is extremely valuable and useful
to them, which forms an emotional bond to Safaricom. Now the number of transactions has grown, it
is beginning to contribute to the bottom line, but in a very small way because the transaction fee is
very low and is shared at least three ways. The extra operational costs of MMT are quite high. So for
me M-PESA remains an enormous product for stickiness and loyalty. As a secondary factor, it will
become a contributor to the bottom line.
Has Zain's launch of their mobile money service ZAP in February affected your strategies
having gone from being the sole player to having a form of competition?
Michael: Our strategy hasn't changed. As market leaders, as with every other product that we've
launched here, we look ahead not behind us. We just need to ensure that Safaricom gives our
customers quality and reliable service. There are some issues around competition for agents, but
that's normal in this competitive world.
The Kenyan Central Bank's audit of M-PESA dominated headlines at the turn of this year,
and congratulations on reconfirming their approval - what advice would you give other
mobile money ventures about maintaining a dialogue with regulators and specifically
about what they look for from mobile money
operators?
Michael: Firstly, this is a very new service in the financial
sphere; before M-PESA there was only basic SMS banking,
such as balance check. The Kenyan Central Bank have
taken a bold step in allowing us to go forward, and they have put themselves at the forefront of
mobile money all over the world - they are getting asked about M-PESA at global conferences!
The key thing is because mobile money is so new, we don't want to attract regulations which are too
heavy to maintain the service as it is. We welcome regulation of mobile money or mobile banking, we
just don't want to be subject to the same regulations that banks are, as the values and risks involved
are different.
So my advice for MMT operators: firstly, you need to keep the banking regulators involved right from
the very beginning. Don't go against the regulator - if they have concerns, you should accommodate
them. You need to work with them - they should almost think this is their product. Secondly, be
sensitive to the banking industry. You need to work very carefully with them, because they will be
worried about what you're doing.
"Now the number of transactions
has grown, it is beginning to
contribute to the bottom line"
"The Kenyan Central Bank... have
put themselves at the forefront of
mobile money all over the world"
Pauline: The regulators job is to look at security of any system in which a customer will trust their
money. So you need to look at security and customer protection issues very early on.
Michael: We passed the Central Bank's audit because we provide the information that they would
have required in any event - we give them that information on a regular basis.
When we were preparing the MMT Africa conference, at which you are kindly speaking for
us, at that time you were busy mobilizing M-PESA's resources to help with famine relief in
Kenya - can you tell me about what was involved in
that?
Pauline: A product like M-PESA, that a lot of people have
access to, is a great way for organisations to reach out to
average Kenyans for support. A number of initiatives,
including two run by the Red Cross and the Ministry of
Information, opened up new donation channels through MPESA.
This has allowed people who don't have a bank account and may be in remote locations, to
support the initiatives.
In famine areas people rely increasingly on remittance, and M-PESA can get money into an area cost
effectively to provide people the support they need to purchase food.
After the post-election violence, Concern Worldwide piloted a programme where they were paying out
to IDPs (Internally Displaced People). They've scaled that programme up, so it's not just for people in
remote areas that have been displaced due to violence, but it can be anyone - even in an urban area
who may be suffering from effects of the famine - that receives cash transfers.
Michael, you famously said that "the world's population will look back in ten years time
and acknowledge that MMT was the product of the decade" - what can mobile money do
for the world in the next ten years?
Michael: We have a long way to go but MMT has enormous
potential. We have only looked at the tip of the iceberg so
far. I don't think it will happen in all countries; nothing major
will happen in the UK or US for example. But if you look at
the developing world, our world, this is going to make a huge
social impact, the scale of which we haven't really grasped
yet.
People make use of M-PESA in ways we never imagined. For example, over the Christmas period in
Kenya, you couldn't buy a beer in a bar in Western Kenya unless you had M-PESA because the banks
were closed, so bar owners couldn't bank cash.
I've never heard of a better incentive to drive subscriber numbers! Perhaps that should be
the message for your next award winning advert!! Many thanks for sharing your insights
Michael and Pauline; see you next week at MMT Africa!
