Who Needs Banks If You Can Use Your Mobile To Send And Receive Cash?

Business Case Of M-PESA

Various studies have been conducted on african economies and the continent as a whole by well known research outfits- The McKinsey Global Institute (MGI), Ernst & Young , Forest Research and many others. The results have shown that African economies are on the move. The continent has been the second-fastest growing region in the world over the past decade. As Cameron said in Lagos, "Which continent has six of the ten fastest growing economies in the world?... Africa is transforming in a way no-one thought possible 20 years agoand suddenly a whole new future seems within reach." Sure, Africa still faces huge hurdles -- in South Africa, 11 million people live below the poverty line, and almost 6 million have HIV; in Nigeria, 110 million out of a population of 160 million live on less than $2 a day. In 2002, during my undergraduate days at University of Ibadan, it costs me almost N15,000 ($96) to buy a secondhand SIM card! The same SIM card can be offered for free today. Only superlatives seem appropriate to describe the mobile phone 'revolution', its impact and its potential in Nigeria and on the continent. According to the African Development Bank, there were fewer than 2million mobile phone users in Africa in 1998. This number grew to more than 400 million by 2009 and the GSM Association predicts cellphone numbers will top 735 million by the end of this year- in excess of 70% penetration. It is estimated that about 90 per cent of the people living in developing countries do not have access to financial services. Also, in some developing countries including Kenya, some people live below the international poverty line of US $1 a day. Some of the issues related to this phenomenon include; difficulty in accessing banking services owing to geographic distance, bureaucratic nature of banking services and misconception regarding the inability of the poor to repay their loans. In fact, more than one billion people fit this description, and the number is only likely to increase. To that end, many companies are considering how to give residents access to banking services via their handhelds. M-PESA: Mobile Money for the Unbanked M-Pesa a mobile payment service in Kenya is the shining example of such revolution. It has enabled people without bank accounts to have access to easy-to-use, widely accessible and cheap money transfers. M-PESA, an innovative payment service for the unbanked. Pesa is the Swahili word for cash; the M is for mobile. The initiative enables customers to send money quickly and securely to another mobile phone user. M-Pesa, a public private partnership operated by Safaricom (part of the Vodafone Group), was created with initial financial support from the UKs Department for International Development (DfID).Since its launch in March 2007, M-Pesa has exceeded expectations and now has more than twety two million customers (more subscribers than bank account holders in Kenya).Its overwhelming popularity is testament to its utility. More than a quarter of Kenya's GDP now passes through a phone-to-phone network called M-Pesa.

Factors which led to M-PESAs Success M-PESA mobile money service has reached critical mass. According to Safaricom, M-PESA has 15 million users and up to a third of the Kenyan GDP passes through the system. It handles KSH 1.8billion (US$ 21 million) a day, with transaction values ranging from KSH 10 (12 US cents) to KSH 70,000(US$ 820). In total, M-PESA has seen KSH 1.5 trillion (US$ 17billion) in peer-to-peer transactions. As at March 2011, 81% of Safaricom's more than 17 million subscribers were registered M-PESA users.This rapid take-up is a clear sign that M-PESA fills a gap in the market.

The product concept is very simple: an M-PESA customer can use his or her mobile phone to move money quickly, securely, and across great distances, directly to another mobile phone user. The customer does not need to have a bank account, but registers with Safaricom for an M-PESA account. Customers turn cash into e-money at Safaricom dealers, and then follow simple instructions on their phones to make payments through their M-PESA accounts; the system provides money transfers as banks do in the developed world. The account is very secure, PINprotected, and supported with a 24/7 service provided by Safaricom and Vodafone Group. 1.Widespread Agent Network There is a high distribution of agents across the country,even in villages. M-PESA has more than 40,000 agents countrywide where customers can make and receive payments,. Payments can also be made via Western Union from 70 countries and it has in excess of 900 paybill partners. 2.Reliable Service M-PESA provided reliable services. According to CEO Bob Collymore: Studies show that customers save 3 hours per transaction which is ploughed back into economic productivity and the savings of $3 is spent mainly on food and saving. 3. Targeting Mobile Phone Users M-PESA became successful because it was targeting cell phone users or people who owned mobile phones. You dont need a bank account to operate the mobile money it thus caters for the unbanked. Is Nigeria the next big market for Mobile Money? According to a Boston Consulting Group report, mobile financial services are expected to improve the lives of around 2 billion people in developing countries within a decade and boost economies. Mobile commerce is gradually taking off in Nigeria, though rather belatedly due to lack of clarity around the licensing of mobile money providers,despite the country saying that cashless economy was vital to its goal of becoming one of the top 20 largest economies in the world by 2020 (Vision 20:2020). In November 2010, the CBN granted 16 operators approval-in-principle licenses to operate mobile money services in the country. The operators were Stanbic IBTC, Ecobank, Fortis MFB, UBA/Afripay, GTBank/MTN, First Bank, Pagatech, Paycom, M-Kudi, Chams, Eartholeum, ETranzact, Parkway, Monitise, FET and Corporeti. Latest data from the Nigerian Communications Commission (NCC) relating to the end of March 2012, regulatory data shows there were 98.547mn subscribers in the country at the end of March 2012. With this mobile phone subscribers,Nigeria offers a robust market for mobile money growth. The fact that there is a little over 22 million bank accounts in a country of over 160 million people, with a large percentage of the population lacking access to formal financial transactions, may serve to drive mobile money adoption. It's been predicted that after the success of M-PESA in Kenya, Nigeria is the next big market in Africa in terms of Mobile Money. Experts strongly believe that the introduction of m-payments will provide boundless opportunities for the unbanked population and also will be one of the key drivers for financial inclusion going forward and thus has the potential to be the most powerful tool for economic and social development in Nigeria.

This case is written by Adedoyin Adebayo