M-Pesa has a menu item that gets little use today: “Buy Goods.” The Buy Goods functionality is meant to facilitate in-person, in-store payments.
Background: In-store payments in Kenya are dominated by cash, with credit/debit cards representing a very distant minority. Card adoption and usage has been stifled by multiple factors, but chief among them are:
- Fractured infrastructure: There is very little interoperability between the largest banks in Kenya and as a result each bank rolls out its own fleet of point of sale (POS) devices. If you’ve ever paid attention while doing a card transaction at a large restaurant or hotel, you will have noticed that the merchant often has an array of bank-branded POS devices; these provide service for “non-branded” cards (cards that are Equity-only, without a Visa or MasterCard logo, for example) and/or enable the merchant to re-direct payments to the cheapest available option that month. Downsides to this situation include inefficient deployment of POS devices (multiple per merchant) and fragmented merchant liquidity (due to their need to have merchant accounts at an array of banks).
- Cost of infrastructure: POS devices are expensive, easily costing $300-500 for basic models. Given the number of merchants in Kenya (easily over 100,000) and the high proportion of those that are informal or very small, this cost is not recoverable by either the merchant or the bank through transaction fees.
- Low value transactions: Average transaction sizes for daily payments are very low, far lower than in developed markets. These lower transaction values make the standard card association pricing (which includes a flat fee plus a percentage of the transaction) prohibitively expensive.
The consequence of these factors is that you will find card-processing POS devices only at merchants that process high-value transactions, largely for foreign tourists or wealthier Kenyans. And those merchants will have an array of costly terminals.
M-Pesa’s Buy Goods: M-Pesa has attempted to address in-store payments with its Buy Goods functionality. It’s currently very limited in its availability – the merchants that support it are 2 supermarket chains (Uchumi and Naivas) and a higher-end collection of retail stores (all owned and operated by Deacon’s). These stores also already have card POS terminals, so it’s not exactly expanding their acceptance options in a revolutionary way. But given that mobile phones are close to ubiquitous in Kenya, M-Pesa has the potential to become the standard for e-payments in those retail environments that do not have either the turn-over or high value transactions to support a full POS.
Buy Goods Experience: Given that potential, how does it work in practice? Short answer: pretty well.
We don’t shop at the eligible stores that often and the stories I’ve heard were of cashiers pleading with customers not to use the slow Buy Goods system while the long line of impatient customers clamored for better service. But on a recent trip to Uchumi to restock our Tusker and Alvaro supplies, I was determined to find out whether the stories were true. In the beverages area, there was a free (and rather bored-looking) cashier – the perfect opportunity to try out Buy Goods without any pressure.
As I walked up, I asked “Can I pay with M-Pesa?” The reply came back quickly if not confidently, “Yes, if it’s working.”
While I piled my sturdy glass bottles onto the counter, he made a quick phone call using his cell phone: “M-Pesa inafanya kazi?” – “Is M-Pesa working?” He turned back to me, beaming with pride: “Yes, it’s working.”
After ringing up all of my items, he showed me the screen and walked me through the steps of paying through Buy Goods. M-Pesa à Buy goods à Till # à Purchase Amount à M-Pesa PIN. I received the confirmation SMS promptly, within 10 seconds or so. The cashier then asked to see the confirmation # provided in the SMS and matched it against the only M-Pesa confirmation # on his screen; he clicked it and then asked to see my ID to see if my name matched. Finally, he printed out a receipt and had me sign it.
And that was it. I walked away without having dug into my pocket for cash and dealing with coins. Uchumi had less cash to mess around with. Success.
While it worked smoothly, there are several facets of the transaction that could be improved. A sign could display the purchase process so that I wouldn’t depend on the cashier for instructions (and risk entering in the wrong till #). I also don’t see the need for either the ID check or the signature – the M-Pesa confirmation # should suffice.
But overall an interesting experience with M-Pesa in-store payments. The next time I’ll try it with a full line of hurried people in line behind me and see if it goes as smoothly… or if I get booed out of the queue.