Companies

Safaricom takes on plastic money with mobile wallet

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Safaricom general manager (financial services) Betty Mwangi-Thuo and chief executive officer Bob Collymore during the launch of the Lipa Na M-Pesa campaign at Safaricom House in Nairobi Monday. SALATON NJAU

Telecoms service provider Safaricom Monday launched a new financial service that enables consumers to pay for goods and services using mobile money without incurring transaction charges.

Kenya’s leading mobile phone company launched what is effectively a mobile money wallet as it deepened its foray into the financial services market, aiming to take control of Kenya’s transformation into a cashless economy and reap its benefits.

Though the service Lipa Na M-Pesa is not the first mobile money wallet to be launched in the Kenyan market, its leverage on Safaricom’s large customer base, a wide network of agents and massive marketing muscles puts it in a class of its own.

Shopkeepers, kiosks, saloons and motor garage owners must register their businesses with Safaricom and get a special till number to offer the service that is seen as the mobile telecom firm’s reply to plastic money and other forms of cashless transactions.

Unlike M-Pesa, which charges a commission for every transaction, the new service shifts that responsibility to the registered service providers, levying them a 1.5 per cent commission on the value of every payment made through the system.

Shoppers can, for instance, use the mobile money platform to pay for goods at the supermarket till and send the exact value of the good sold or service rendered thus eliminating the additional charges that have sustained cash as the most popular means of payment in the country.

By fixing its commission at 1.5 per cent, Safaricom is directly attacking the credit cards market where commissions stand at between three and five per cent – making it the cheapest means of making cashless transactions in the country.

“Traders currently pay between three and five per cent for credit card transactions but Lipa na M-pesa will charge only 1.5 per cent commission, so we will be competing with cash payments and credit cards,” said Bob Collymore, the Safaricom chief executive.

Mr Collymore said that although many M-Pesa customers have been able to use it to pay for goods and services it has come at a price because most service providers have forced their customers to include the withdrawal fees in the payment.

“M-Pesa was launched to facilitate the transfer of money from person to person but over the years it has evolved and we now want to mainstream it as a person to business payment solution before ultimately offering business to business solutions,” said Mr Collymore.

“With Lipa Na M-Pesa, our customers now do not have to include the withdrawal charges while making payments,” he said.

Traders will use copies of their PIN certificates, Identification Card and trading license to get a till number that customers will use to pay for goods and services.

To use the Lipa na M-Pesa service, customers will go to the M-Pesa menu and select payments services, buy goods, then enter the till number displayed by the traders and follow the subsequent prompts to complete the transactions.

The service can be used to pay for any transactions valued at between Sh10 and Sh70,000. With ordinary M-Pesa transactions, a customer buying goods worth Sh500 has to include Sh27 for withdrawal fee – amounting to additional costs for the same product compared to cash buyers.

Safaricom has registered 5000 traders for the Lipa Na M-Pesa service and Mr Collymore said he expects the number to rise to 100,000 by April next year.

Betty Mwangi, Safaricom’s general manager for financial services, said that the traders will not only have access to 17 million M-Pesa customers but also help move the economy to a safer and more convenient way of making payments.

“Use of M-Pesa to pay for goods and services means traders will handle less cash and therefore be less susceptible to risks associated with cash such as theft and the peddling of fake currency,” said Ms Mwangi.

Safaricom’s launch of the new payment service comes at a time when global financial service providers and technology companies such as Google have rolled out mobile wallets aiming to control the cashless money space.

Telecoms operators have also intensified their investments in mobile money transfer services seeking new revenue streams as the voice market matures leaving little room for growth. Voice remains the major contributor of Safaricom’s revenue accounting for 62 per cent or Sh77.6 billion of the total revenue. Fixed and mobile data accounted for 7 per cent (Sh8.4 billion) of the total revenue in the last financial year while SMS accounted for 8 per cent (Sh10.13 billion) of the revenue.

M-Pesa contributed 18 per cent of Safaricom’s Sh124.3 billion revenue in the year ended March 2013 up from 16 per cent the previous year.

(Read: Mobile cash transfers surge to Sh425bn in first quarter)
M-Pesa revenues have grown from Sh0.37 billion in 2008 to the current Sh21.8 billion.

The number of users registered for the service has also grown from 3.6 million in June 2008 to 17.1 million in March 2013.

The mobile operator has used its vast number of agents, which now stands at 65,547 to drive growth in this segment of the business and the new Lipa Na M-Pesa is expected to follow a similar pattern of growth. More recently, Safaricom has been migrating M-Pesa to a new platform that will enable users to instantly pay their bills.

Under the new system, whose processing capacity is expected to increase, clients will settle post-paid electricity bills, insurance premiums and bank payments in real-time.

(Read: M-Pesa upgrade to ease payment of electricity bills)
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.

In March last year Safaricom cut withdrawal commissions it offered M-Pesa agents under a new tariff regime in an effort to grow the amount of large deposits on its money transfer platform.

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