The mobile money chronicles

Stories from the African mobile money revolution

15. Stella

Stella manages multiple financial products in Kenya, the biggest of them being Western Union and Moneygram. I met with Stella to get her perspective from a financial services provider. 

She says she has two major challenges. Firstly, she wants to ensure her products are promoted by agents adequately in an extremely competitive environment. Secondly, she wants to ensure that her distribution channel meets the standards of quality that she needs to maintain her brand.

In light of the recent fact that the number of m-pesa transactions now outnumbers the number of transactions that Western Union does globally, I asked Stella if she was feeling the pressure.

Stella thinks that competition is healthy and that there is still plenty of space for multiple players to co-exist. 

She pointed out that Western Union addresses a specific need for foreign remittances and is not threatened by m-pesa. Foreign remittances come from Kenyans abroad sending money to their families.(According to her, in Kenya it is understood that the amount of money you send home to your family needs to be proportional to how highly educated you are). Another significant source of remittances is money being sent to refugees in Kenya.

Stella believes she still has an edge over other players, and even though the number of transactions is not the highest, the value per transaction for foreign remittances is much higher, making it attractive for Western Union agents in terms of commissions.

She does acknowledge however, that m-pesa has brought a new level of convenience and reach to Kenyans which other financial products must match if they hope to compete.

That is why, with the amendments of the Agency Banking act from last year, she is actively looking to build a stronger distribution network for her services across Kenya.

It is time to wake up and smell the coffee, she says.

14. Frank

Frank manages mobile money outlets in 19 retail stores across Nairobi as part of a strategic alliance with Nakumatt stores. I met him over coffee in Nairobi to get a deeper perspective on the collaboration between mobile money and retail chains as an urban distribution channel for financial services in Kenya.

On one hand, he agrees that the collaboration between mobile money and retail is extremely profitable.

On the other, he says that this comes with its own challenges in execution. Operating within the retail super structure of Nakumatt means that customers treat the m-pesa outlet as part of the retail store. Consequently they expect things that might be possible in a supermarket but not in a bank, like for instance, trying to withdraw money without an ID. This leads to frequent discussions, during which managers from the retail store also get involved and Frank finds himself performing a constant balancing act.

The Agency Banking law for Kenya was amended last year to expand the scope of entities that are allowed to offer financial services. And although this is a flavor of challenges that come with any strategic alliance, it is especially challenging for a new industry that sits at the confluence of banking, telephony and retail.

13. Lucas

Lucas is located in a district of Kisumu called Jua Kali (it means hot sun, and lives up to its name) in the midst of auto repair garages where mechanics are soldering metal noisily all day.

It has not been all easy for him but he is one of the most positive people I have met. He used to run an m-pesa outlet with his wife. That is, until she decided to rob him of all his money and leave him. He was able to get back in business within a couple of days thanks to a timely loan. He says he has forgiven her.

Mechanics in this district use m-pesa to deposit their earnings several times a day since it is a tough place to work and theft is rampant. There are also those with a mission, Lucas tells me he has this one guy who is determined to save 50,000 Ksh by Christmas. He deposits 1000 Ksh every single day into his mobile money account.

But otherwise in this district, it is mostly business. Mechanics and garage owners come to Lucas to pay for motorcyles and auto spare parts. 

Motorcycles are always in demand since they constitute one of the three pillars of transportation in Kenya -  boda-bodas. (The other two being tuk-tuks and matatus). 

Men here order their motorbikes from Uganda.They place an order via phone, pay via m-pesa and get delivery within a couple of days. (If I try to order anything in the Netherlands, delivery takes atleast four weeks)

And so it is that m-pesa is greasing the wheels of the Kenyan economy. How so? Mobile commerce has directly increased the velocity of money in the economy, which means this has a positive effect on the GDP and keeps inflation under check. And despite the fact that mobile money is not treated as part of the banking system legally (which has led to a lot of debate about gaps in regulatory frameworks), even the governor of the Central Bank has admitted that m-pesa has led to a more stable Kenyan shilling.

Quite something for a commercial product which is not even 10 years old.

A mobile money outlet which is mobile in the literal sense. A creative solution to find customers instead of waiting for them.

12. Pamela

Pamela is an m-pesa agent in the town of Holo.

Her outlet used to be located next to the town market, but since the town market ‘shifted’ by about 100 m, she has seen a rapid decline in transactions. Previously she would serve 200 customers a day, now she serves between 30-60. 

This brings to mind two ways in which mobile money operates like a typical retail business. Firstly, location is the most important factor to running a profitable m-pesa outlet.Secondly, customers have a lot of choice. The key to retaining customers is ready availability of float/cash and customer service. 

Another reason why m-pesa is not like traditional banking is that ATMs do not have to compete against each other, but m-pesa outlets do. Pamela says that she frequently has competitors who send ‘fake’ customers to buy additional float (e-money) from her.( An agent is only as good as the amount of float she has, since that will determine the amount she can transact)

The number of mobile money outlets is a function of how profitable they can be for the owner, which means there will be a point when the growth of outlets will stagnate. This is already happening in some rural areas.

But there are still those who are finding creative ways to get around the location problem. I came across a mobile money outlet which was mobile in the literal sense. It was a fortified matatu which dispensed cash. No problems with attracting customers. The matatu drives to where the customers are. This could be a solution to reach very remote areas, provided that the costs of transportation and arranging security are offset by the benefit of increased commissions.

11. Judith

Judith runs an m-pesa outlet in the town of Siaya, very close to the village where Barack Obama’s father was born. She is one of the most experienced m-pesa agents around.

Judith’s neighbor is a dressmaker called Caroline. Both stores are located next to each other, and even share a sign - co branding at its best.
The dressmaker has seen a huge jump in her business since Judith moved next door.Women who come to the m-pesa outlet are distracted by the advertised creations and frequently amble across next door to get a nice new dress.
One of the reasons contributing to the propensity to splurge, in addition to Caroline’s sewing skills, is that there are clear trends in m-pesa usage. Transactions are highest in the beginning of the month when people receive salaries and therefore have more to spend.
But the intriguing thing is that women usually pay the dressmaker by directly transferring money via phone.
This means that they end up incurring higher commission charges for the transfer, when they could withdraw cash more cheaply next door from Judith. It seems that the convenience of an instant money transfer on the phone is something that customers are willing to pay a premium for.
Judith says she is amused. But this is a fundamental shift in consumer behavior about money - from mattress banking to mobile banking.

10. Gladys

Gladys just moved to Siaya from the Rift Valley. Her husband is a prison officer. She is a housewife and has a small baby. She came in today to open an m-pesa account. I asked her why. She said she was told to get one because her aunt wanted to send her money and she smiled.

This made me realize that the ” send money home” marketing proposition was very powerful since it correctly identified a very dominant trend in Kenyan society. Families are closely knit and they help each other out economically. Almost everyone I have spoken to regularly sends money to a grandmother, a nephew, a parent or a close friend. Before mobile money, cash was sent via post or courier and was prohibitively expensive. Here is an example of an early ” send money home” commercial.