M-Pesa is rightfully held up as an incredible success in the world of mobile money. Its uptake (13M and counting), usage (15M + transactions per month), and value of money transferred is really remarkable – and even more so given it has only been around for a bit over 3 years. It has vastly improved the process of P2P money transfer: before M-Pesa, Kenyans would send money via bus driver or other informal means which was costly, slow and insecure; with M-Pesa, Kenyans can send money electronically for a smaller fee and it arrives instantly with great reliability.
However, despite massive growth in Kenya over a short period, M-Pesa has not found success in other countries despite several attempts by Vodafone. There are efforts currently underway in Tanzania, South Africa and Afghanistan – all with nothing close to the results seen in Kenya.
So why is that?
Having spent a lot of time talking about this with my coworkers as well as visiting academics and researchers, I think these are 4 of the main reasons:
- MNO Monopoly: This one is probably the biggest by far. Safaricom has somewhere between 75 – 85% of the mobile market in Kenya. That enabled Safaricom to do many important things, including:
- Create a huge closed-loop of mobile transfers, wherein the Safaricom-customer to Safaricom-customer transfers covered such a large proportion of existing subscribers that it could generate huge volume without having to be interoperable.
- Roll out a huge network of M-Pesa agents. We’ve heard customers say that “M-Pesa is like your shadow” – there’s always an M-Pesa agent nearby. Having agents in every village meant that people were comforted by the easy accessibility of their M-Pesa money. Now Safaricom has over 23,000 agents – a number so astounding that it’s not at all surprising to see 3 of them on the same side of the street next to each other and another few across the street. They are the Starbucks of cash-in and cash-out.
- Regulatory Free Pass: The Central Bank of Kenya supervised but did not regulate M-Pesa until very recently (February to be exact). That’s 3+ years of unregulated growth.
- Existing Money Flows: Domestic remittances represent a huge flow of money in Kenya. In other places (like Mexico and much of Latin America or India) it’s international remittances which are much more difficult given multi-party and cross-border challenges. Not so in Kenya – domestic remittances, largely sent from Nairobi “up-country” or to areas outside of Nairobi, are big business. These domestic flows created a perfect usage scenario for a nation-wide closed loop like M-Pesa.
- High SIM Penetration: Not as unique to Kenya as the previous 3, but still important, is the high penetration of SIMs. I specify SIMs because in order to receive M-Pesa money in, say, a rural area, one doesn’t even need to own a phone – a SIM that can be obtained for free and popped into a neighbor’s phone does the trick. (Note: it’s also possible to receive money without having a registered SIM but that’s more costly for the sender.)
There are probably others as well – what are your thoughts?