Markets & Finance

M-Pesa among fastest growing cash transfer services

m-pesa

An M-Pesa agent (right) serves a customer in Nairobi. M-Pesa revenues accounted for 18 per cent of the Sh144.67 billion that Safaricom made in the last financial year. File

Safaricom’s M-Pesa has topped the fastest-growing and most profitable cash transfer companies and should now be ranked alongside its peers, international banker UBS says in a research note.

The coverage note says M-Pesa should now be treated as a money transfer or payments processing service rather than just another mobile phone application. Analysts at UBS say that when the growth in revenues and profits generated from M-Pesa are compared with those from other services like Visa and MasterCard, the Safaricom unit’s performance emerges on top.

“However, given M-Pesa’s far faster Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) growth than the majority of the global payments/transaction processing peers (29 per cent year-on-year Vs peers at an average of 10 per cent), we believe a multiple (comparison) at least in-line with these peers is justifiable,” says the coverage note.

The report says the average growth rate for Visa and MasterCard revenues over the last three years is 11 per cent each while EBITDA stands at 11 and 10 per cent respectively. UBS says that over the same three-year period, M-Pesa’s revenues have on average grown by 20 per cent while EBITDA has grown by 29 per cent.

The global average for all the 12 payments and transaction processors covered in the report stood at eight and 10 per cent respectively.

Active merchants

ADP, Paychex, FIS, Fiserv, Western Union, Global Payments, Convergys, Heartland Payment of the US, Cielo (Brazil) and Wirecard (Germany) are the other companies UBS used for comparison.

For the financial year ended March 31, 2014, M-Pesa generated Sh26.56 billion turnover from the previous year’s Sh21.84 billion, a 21.6 per cent increase. M-Pesa revenues accounted for 18 per cent of the Sh144.67 billion that Safaricom made in the last financial year.

READ: Safaricom net profit rises 31pc to Sh23 billion

Analysts at UBS say they expect that the service will continue to rake in more revenues as it evolves from transfers between individuals to an alternative for cash in business transactions. Safaricom management has also said it will focus on the Lipa na M-Pesa service to grow revenues.

READ: Safaricom sets sights on fast growth of ‘Lipa na M-Pesa’

“Our priority this year is to commercialise this service by growing the number of active merchants and making Lipa na M-Pesa the preferred electronic payment platform.

This will make a significant contribution to the lives of our customers and accelerate Kenya towards a cash-lite economy,” said Safaricom chief executive Bob Collymore when the telco released its results in May.

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