M-Pesa’s new platform promises faster payments

Safaricom says the M-pesa upgrade will offer users more opportunities. File
Safaricom says the M-pesa upgrade will offer users more opportunities. That means shoppers will use M-Pesa to pay for their goods instantly at the till, opening a window for the mobile money platform to effectively compete with the credit cards. File 

Telecoms service provider Safaricom is migrating its pioneering mobile money transfer service M-Pesa to a new platform that will offer seamless connectivity to vendors of services such as electricity.

It will also enable users to make instant payments for corporate services such as insurance.

The migration, to be done in the next few years, will for instance enable M-Pesa users to instantly pay electricity bills.

It will also save customers inconveniences such as disconnections that occur as the current platform reconciles the transactions.

It takes 48 hours for payments made to Kenya Power, for instance, to reflect on the electricity distributor’s systems while those to the National Hospital Insurance Fund (NHIF) take 76 hours.


“To move M-Pesa to the next level we are acquiring a new platform that will handle more bulk payments such as salaries, pensions and bills in a much better way than it is currently done,” said Michael Joseph, Safaricom’s former chief executive and the director of mobile money at Vodafone Group Services.

Mr Joseph said the new platform will come with additional functionalities that allow for M-Pesa’s integration with those of other vendors in banking, micro-insurance and the retail sector, especially the supermarkets.

That means shoppers will use M-Pesa to pay for their goods instantly at the till, opening a window for the mobile money platform to effectively compete with the credit cards.

M-Pesa is also eyeing bulk government payments such as pensions and salaries paid to beneficiaries in remote areas with the new platform.

Mr Joseph, who spoke with the Business Daily in an interview as the telecoms giant marks five years since Kenya pioneered mobile money under his watch at Safaricom, said upgrading the M-Pesa platform is part of a wider plan that should help Safaricom manage its operation costs and grow its bottomline in the next five years.

Part of that plan is to relocate M-Pesa servers to Kenya from Germany -— a move that is expected to improve the reliability of the mobile money platform and cut down on overheads.

Hosting M-Pesa servers locally should also eliminate disruptions that occur whenever the undersea fibre optic cable is damaged and reduce the time taken to restore the system in the event of such a damage.

Safaricom has in the past three weeks been forced to reroute its international traffic to satellite platform after its main link to the global network of highspeed Internet, the TEAMs cable was damaged in deep sea.

Safaricom has a 22.5 stake in TEAMs and uses the bandwidth to connect to other parts of the world including Germany where the M-Pesa servers are currently hosted.

More than 625 institutions -— ranging from banks, insurance firms, schools and Sacoo groups, are listed on Safaricom’s website as using M-Pesa to pay bills or dividends.

Part of Safaricom’s game plan is to grow its data revenue by increasing M-Pesa’s share of bulk corporate transactions that are currently facing the challenge of time.

M-Pesa was launched in Kenya in 2007 as a person- to- person mobile money transfer service but has over the years evolved into a popular payment model that is used by small business and big corporations to make bulk payments.

“More people are now using M-Pesa to store money and get small loans, which they could not do before,” said Joseph.

Since it was launched in 2007, M-Pesa has steadily grown to become a major contributor to Safaricom’s profit.

Last year, voice business contributed 67 per cent of Safaricom’s Sh94.8 billion revenues while data accounted for 13.6 per cent.

M-Pesa contributed 12 per cent while revenue from sale of equipment such as laptops accounted for seven per cent of the total.

M-Pesa revenues grew from Sh0.37 billion in 2008 to Sh11.78 billion in 2011 and Mr Joseph disclosed for the first time that the mobile money platform broke even in 2010 by a margin of 25 per cent of its Earnings Before Interest, Tax, Deprecation and Amortisation (EBITDA), which stood at Sh7.56 billion.

Data from the Central Bank of Kenya indicates that the amount of money transferred through mobile phones crossed the Sh1 trillion mark in 2011.

M-Pesa moved Sh116.6 billion in December 2011 alone, miles ahead of Tangaza’s Sh1.31 billion. Airtel Money transferred Sh420 million, Orange and Yu Sh20 million each while MobiKash handled Sh4 million, the Central Bank data showed.Safaricom did not disclose how much of the total money moved is attributable to M-Pesa’s corporate clients but estimates indicate it may range between 30 to 40 per cent.

As at the end of last year, Safaricom had 15.21 million mobile money customers making it the largest mobile money transfer service, followed by Airtel with 3.16 million customers.

Yu had 520,000 customers against Telkom Kenya’s 130,000, MobiKash 110,000 and Tangaza 70,000.

The announcement by Mr Joseph who is currently based in London and is in charge of all the mobile money projects in Africa, comes days after Safaricom reviewed M-Pesa tariffs and announced new commission bands for its agents.

Under the new tariff regime, Safaricom cut withdrawal commissions in an effort to grow the amount of large deposits on its money transfer platform and boost corporate transactions.

The firm increased deposit commissions by between 12 per cent and 170 per cent while reducing withdrawal commissions by up to 25 per cent.