Mobile money opens smooth traffic for business transactions

Mpesa and Zap have become popular among
Mpesa and Zap have become popular among individuals and businesses. 

Dorcas Mwatela has just walked out of a kiosk in Mathare, where she paid the electricity bill for her salon within the estate.

“When I get back, I expect at least one of my clients today will pay me by M-Pesa,” said the 40-year-old braid specialist.

“Tomorrow, I will send my cousin in Siaya money using the service. He needs it to pay for a motor spare part.”

Just a few metres away from Ms Mwatela’s salon is a small shop that was the first outlet to offer M-Pesa, the mobile money transfer solution developed by telecoms firm, Safaricom, and launched in this market over two years ago.

A petrol station houses the small shop that first tested the service in 2005.


By its creators’ estimates, M-Pesa was only supposed to have recruited hundreds of thousands to date, and was geared towards providing a cheap money transfer service for low-income groups.

But with 6.1 million users today, the service has become a force for the small trader, who is increasingly using the cash-less system for bill payments.
Ms Mwatela’s transactions could form the basis of a new financial order.

An increasing number of small businesses have embraced the services offered by mobile money transfer products such as Safaricom’s M-Pesa and Zain’s Zap, preferring to trade using virtual money, with the operations providing the safety associated with banking.

Traders are upbeat about the services that allow them to carry a lot of money while feeling secure, pay and receive money instantly.

The systems are considerably foul-proof considering that even the unscrupulous businessmen and women who have delayed transactions with bouncing cheques have no room because one can only transfer or withdraw what they own.

Since its official launch in 2007 as a rudimentary money transfer service, M-Pesa has risen to become the country’s unofficial preferred payment model.

With six million Kenyans now using the M-Pesa service to transfer over Sh17 billion monthly, mobile money is taking on more prominence for the small trader, who sees in the product as a means to improve their business processes.

Slowly, more owners of bars, hair-dressers and clothes stores across the country are now accepting mobile money as a payment channel.

Analysts say the tool is fast becoming the disruptive technology that will revolutionise the way Kenyans treat money in this market.

“The fact that small traders are using it for bill payments was not our original intention, it is a market-driven innovation,” said Michael Joseph, Safaricom CEO.

Products like M-Pesa represent attractive revenue centres, promising to rake in over nearly $124 billion in the next five years for developers, operators and related businesses.

Research firm ABI predicts that by 2013, over half a billion subscribers will use their phones for mobile-commerce.

But the attraction is not restricted to the mobile sector.

Recent moves in the financial sector indicate the traditionally technology-shy Kenyan banking community is also warming up to the cost-saving benefits of mobile money services.

“We see our partnership with M-Pesa as the largest outreach programme in corporate Kenya’s history,” said Martin Odour-Otieno, the Kenya Commercial Bank CEO.
KCB has become the first Kenyan bank to state its intention to ride on M-Pesa technology to extend its reach.

The bank hopes to use the service to attract small traders like Ms Mwatela who require micro-finance products such as loans to build their businesses as well as using the tool to recruit the traders who do not have formal bank accounts.

Even with the interest of some members of the banking community, it is still a two-horse affair in the mobile money transfer market.

Six months ago, some players pledged to unleash their ‘M-Pesa killers’, the fighter brands that aimed to compete for the big revenues and wide publicity that the pioneer service had marshalled. They are yet to create impact.

Essar, which had indicated that it would roll out a system with Obopay, is yet to ink a deal with the America-based online payments channel, while Telkom Kenya is said to be reconsidering its intention to launch a mobile money transfer product in the next two years.

One of the challenges the new players are facing is the customer loyalty and the temptation to be a copy-cat of what is already in the market.

Competitors will also have to mount a restless campaign to leave a scratch on the market surface and confront constant product reviews by leaders that have realised that value-addition, pricing, and customer care were the key platforms from where revenue is minted.

Among the financial players, most companies have gone back to the drawing board hoping to come up with distinct services from the two local market leaders, M-Pesa and Zap.

But Zap, which aspired to build on the gains made by M-Pesa, has run into operational headwinds after its much anticipated launch a few months ago.
Having recruited nearly 300,000 users, who can access the service through a network of over 4,000 agents, Zap’s growth is taking off at a higher speed than M-Pesa did in its early days.

Positioned as an m-commerce solution as opposed to a money transfer product, Zap allows customers to gain access to money in select bank accounts, as well as pay for bills, products, and services.

But consumer awareness on available outlets is not high and market players say it is yet to push past the high publicity and visibility enjoyed by its competitor.

“Even though the commissions for agents are better than those on M-Pesa, you will not find people walking in asking to ‘zap.’

The company has not provided us with the right branding materials or supported the product enough by advertising to make it attractive to consumers,” said an agent who spoke on condition of anonymity due to his relationship with the firm.

At just Sh10 per transaction, Zap is a cheaper solution in the market at this time, and agents say that alone should drive more consumers to use it.

Zain says that Sh2.3 million is transferred on its service daily, but its agents say that most customers shy away from the service because awareness levels are low. “Just try finding a Zap outlet outside the CBD – they are there, but they are not visible enough,” an agent said.

Is the phone rising to become the mobile bank? Not quite, says new research from CGAP.

“Mobile phones are ingenious devices, but one thing they cannot do by themselves is convert cash into electronic value or dispense cash. They can be used only to transfer or transform value electronically,” said the group in a report titled ‘Banking on Mobiles: Why, How, for Whom?’

CGAP says a bank that wants to cover a new geography with a mobile banking strategy will need a cash-in, cash-out network.

“But it can be ‘clicks and mortar lite,’ because the mobile banking platform itself can help in deploying that network cost-effectively by letting, for instance, an agents’ mobile phone act as a POS for handling agent transactions,” said Ignacio Mas and Kumar Kabir, authors of the CGAP Focus Note 48.