briefing

Africas mobile
money story
Mobile money systems in the developing world could
be crucial, but there are barriers, as Kas Kalba reports

irculating and storing money has always been

a matter of trust, liquidity and perception of
costs and risk. Now we are being told that the
trust is as firm as the mobile in our pocket or
purse, the liquidity is ubiquitous, and the costs and
risks are virtually non-existent as mobile money
(MM) is effectively a free rider or a free app on
our mobile phone.
In emerging markets, Kenyas experience, with
23 million registered users of mobile money
predominantly of Safaricoms M-Pesa has
convinced mobile operators that it will catch on
everywhere. This would place mobile money next
in line after prepaid (itself a form of MM), SMS and
pre-agreed rings as the next killer app. (SMS has
materialised as a key app in certain developing
markets, especially where both literacy and voice
tariffs are high, such as in the Philippines.)
Yet matching Kenyas and Safaricoms lead
in exploiting mobile money as a widely used,
profitable service has not been easy. In most
countries, mobile operators expectations of success
with MM services have been confounded by a
variety of start-up barriers and challenges. In only
a handful of markets has the service thrived and
contributed to profitability. In Tanzania, the second
best MM market in Africa, it was only in 2012 that
as many households had access to MM accounts as
in Kenya in 2008.
Moreover, the key issue is not how many
households or individuals have mobile money
accounts but whether they use them. In Cte
dIvoire, for example, there are over five million
registered mobile money customers, yet well
below a fifth of these are considered active users.
Elsewhere in West Africa a mobile operator has
two million registered MM subscribers but only
15,000 who are active. Agents are getting
individuals signed up but active usage has not
generally followed

Registration-usage gap
So what accounts for this registration-utilisation
gap? Is the barrier ease of use, service credibility,
limited customer cash, or something else? In fact,
what a close look at the MM utilisation process
suggests is that most users experience several
trial and error steps in learning to execute MM
transactions and determining an appropriate MM
26 InterMEDIA | Winter 2013 Vol 41 Issue 5

service provider and trusted service agent(s). The

trial and error trail depicted below shows how
there can be many steps and mis-steps between
registration and utilisation:
Registration > ServiceDemo > AgentTrust > InterfaceTrial >
InterfaceLearn > ServiceTrial > AgentNetwork >
Agent2Trust > ServiceTrust > Utilisation
Where an experience with an agent or interface
protocol or money transfer attempt goes wrong,
there may be a step or two backward before
another attempt is made to test the MM service.
In other cases, the adoption process can be
virtually seamless. However, once MM customers
complete the process successfully, acquiring a
new set of money management skills and
behaviours, they come to appreciate the mobile
money value proposition.
In a recent survey in Tanzania, 75% or more of the
MM service registrants indicated that compared
with alternatives they had tried, presumably
ranging from storing money under the proverbial
mattress, to using other MM providers, their current
MM service was cheaper, quicker, easier to use, safer
and more convenient. Yet, as the experience to date
in many African markets indicates, the MM value
proposition has to be explained, refined, adjusted
to local requirements and conditions, and
corroborated by users friends and by themselves
directly, for the value proposition to take hold.

Triggers of mobile money Use

In turn, MM providers need to understand the
determinants of mobile money knowledge and
usage from the customer standpoint. Based on
recent Kalba International research on the demand
for mobile and broadband services, these
determinants include:
l The MM registration process and related agent
training and incentivisation.
l Cultural and behavioural resistance to the use
of mobile money, including fear of cybercrime,
money laundering, scams and non-functioning
services and, in some cases, that a mobile
operator will push to convert deposits into
minutes, ringtones or value-added services.
l Economic and service pricing factors, with fees
often representing significant charges for
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briefing

in Kenya. (Timing was also a key to the introduction

of prepaid mobile services in Mexico in 1993 at the
time of the peso crisis and accompanying credit
shortage.)
We look briefly at each of these contributing
factors below, putting together a roster of potential
explanations of why in most African countries the
Kenya experience has not been replicated.

registration and campaigns

individuals living on $1$2 a day, while other

times having significant savings over traditional
forms of money transfer, bill payment, etc.
l Tactical behaviour by customers, such as
registering for multiple MM services and
accounts, direct depositing into recipients
accounts (thereby avoiding fees and notation of
active usage in some markets) or avoiding agents
with long queues or those who have been absent
from their service booths.
l The extent of MM connectivity provided by the
operator and the extent of point-of-sale (POS)
activation by the MM provider and whether the
networks of alternative operators and MM
providers are interoperable (at a level easy
enough to use by the average person).
l The scale and calibre of the distribution
networks, including the degree to which
sufficient cash and e-float is on hand, as well as
the training and incentivisation of the agents
(focused on registration or usage). The quality of
such networks varies not only by agent density
but also by agent behaviour. The former is
especially instrumental in Tanzanias rural areas,
along with a significant incidence of agent
absenteeism from their posts.
l The coverage of the mobile network(s) being used
and extent to which appropriate smartphones or
feature phones, eg. with POS-compatible near
field communication (NFC) capability, are widely
available where onsite payment and certain
business services are on offer.
l The nature and volume of marketing campaigns
encouraging mobile money use and highlighting
specific applications.
l Regulatory and standards-setting aspects, with
respect to banking, privacy, security, payment
services and mobile money directly.
There are also special considerations with respect
to offering mobile money in rural areas, such
as the prevalence of digital and print illiteracy,
the challenges of powering mobile phones, the
seasonality of cash availability, and the distance to
the closest agent. Finally, there is, simply put, luck
or timing which, as explained further below,
played an important role in M-Pesas early take-off
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Registering customers for an MM service is the easy

part, especially if agents are awarded a bonus for
each registration. The result can be large numbers
of registered MM customers who have no need for
mobile money, have a need but do not know how to
use the service, or need it and know how to use it
but are hampered from doing so by other tangible
factors (lack of cash or a mobile phone that needs
charging, for example) or intangible factors
(eg. lack of trust). For example, in many cases
MM service registrations take place without a
demonstration of how the MM service(s) of interest
to the new registrant are actually used, as agents
are often incentivised on the basis of registrations
completed rather than initial or subsequent usage.
Poor people, in
particular, take
The experience in
time to reach the
many African markets
point of MM utility,
while those with
indicates the value
more regular
proposition has to be
money transfer
explained and refined to needs may
continue to rely on
local conditions.
legacy means of
doing so, including
the use of agents rather than mobiles. And there
are ingenious techniques such as hiding the money
being sent to a relative in the tyres of a bus (this
is where mobiles are used to alert a relative that
the money is being transferred, when the bus is
scheduled to arrive, and which tyre the money has
been hidden in or behind.)
Similarly, it is important to understand the
nature of the advertising and marketing campaigns
that have been used to stimulate MM registration
and usage, as these may have contributed to the
utilisation gap and may have imbued potential
users with a particular sense of the MM value
proposition. If, for example, the marketing
campaign has emphasised the money transfer
capabilities of MM when customers may be more
interested in bill payment, the marketing campaign
is likely to have had limited effect in inducing
service use. There is also research that indicates
that TV and radio campaigns may have less impact
in fostering the early use of digital products and
services than do family members, often the
younger ones.

Avoidance of service fees

In Sub-Saharan Africa, older and, to some degree,
female members of the population can be kept
from using mobile money due to limited
Winter 2013 Vol 41 Issue 5 | InterMEDIA 27

briefing

literacy and digital literacy. The younger segment, meanwhile, often

faces other obstacles. Primary among these is the lack of cash among
a group that faces unemployment, often above 50% even when their
national economy may be growing at up to 8%. Accordingly, young
adults may be interested in registering for MM services and may have
little difficulty using them but may not have the need to transfer cash
or pay bills very often.
At the same time, some MM users may be using the service without
registering active usage and incurring associated fees. A notable
example of such creative bypassing of fees is the practice of depositing
funds directly into the account of the intended recipient rather than
taking funds from the transaction initiators account and transferring
them to the recipient. Such practices, even conducted frequently
(eg. on a weekly basis), are not recorded on the account of the initiator
of the deposit in some markets only on that of the recipient.
What should be kept in mind is that the service fees associated with
MM services can be burdensome for low-income MM users. They can
represent 50% of the daily living costs of someone at the poverty level,
not to mention a large percent of the amount being transferred.
Moreover, the unemployed often have a surplus of the commodity
that MM services help others save time. Yet obviously this type of
impediment has not kept the population in Kenya from using M-Pesa
widely; so what other factors explain why mobile money has not
taken off elsewhere as it has in Kenya?

M-Pesas special circumstances

In understanding the Kenyan experience, it is important to recall the
high costs of sending money by other methods that prevailed prior to
M-Pesas introduction in 2007. These cost differences are still present
in other countries and continue to serve as a driver of MM use yet
not to the same degree as before. For example, international money
transfer services, which imposed the highest fees, now generally
charge half or less of what they charged before.
The success of M-Pesa in Kenya has been based in large part on the
market dominance of Safaricom, which provides on-net connection to
more than 60% of the countrys mobile subscribers. Correspondingly,
Safaricom has a network of 80,000 M-Pesa agents whereas in Cte
dIvoire, for example, the two largest operators combined (MTN and
Orange) operate with 3,000 agents. In most African markets subscriber
shares of the main operators are usually more equivalent in some
cases there are as many as ten operators, resulting in a highly
fragmented situation. Even when there is interoperability across the
networks, many MM users are not aware of this or do not know how
to execute MM transactions across networks.
28 InterMEDIA | Winter 2013 Vol 41 Issue 5

More generally, mobile-based innovations have

often diffused more widely where there is a
dominant operator such as Docomo in Japan
(i-mode services), Telcel/America Movil in Mexico
(prepaid mobile service) and Safaricom in Kenya
(M-Pesa). By implication, the high degree of on-net
connectivity can also be an important ingredient
in assuring the scalability of MM as well as its
profitability, which, as indicated earlier, has been
limited to a very small number of markets, notably
those of Kenya and the Philippines.
Moreover, most other African countries have
not experienced the civil strife that encouraged
Kenyans to use M-Pesa for money transfer and
storage in 2008 when MM service was initiated in
Kenya. Suddenly, the mattress and back pocket
were not as trustworthy storage places as had
been traditionally assumed, as houses were subject
to break-ins and individuals to being stopped on
the street.
The storage functions of MM are often overlooked
yet were fundamental to M-Pesas diffusion in
Kenya. Money transfer was, of course, the prevailing
official app of M-Pesa, as this incurred a fee,
followed by bulk payments, which were popular
with workers who otherwise stood in long lines at
the end of the week waiting for their paychecks.
Safaricom concentrated its early marketing efforts
on young males with regular income, located in
Nairobi and other major cities, as they were regular
initiators of money transfers, according to its
research. Being young they also caught on quickly
to mobile phone data functions and were less likely
to be glued to traditional money transfer networks.
Finally, M-Pesas success in Kenya is also often
ascribed to regulatory flexibility and the waiving or
non-existence of banking laws that prevent mobile
operators from managing deposit accounts. In fact,
there may have been some flexibility in the early
years when M-Pesa was first introduced. Today,
however, Safaricom is not the depository for the
M-Pesa MM accounts. All the money rests with
authorised banking institutions, with Safaricom in
effect offering ancillary services.

Replicating M-Pesa the downsides

Following the Kenya model, multi-country mobile
operators such as MTN and Orange introduced
mobile money as largely a single-purpose (money
transfer) service in other markets. The expectation
was that the M-Pesa success model would be
replicated elsewhere at even a larger scale, as MM
diffused across multiple markets. Yet money
transfer has generated limited short-term demand
in many of these markets, presumably for a
combination of legacy, cultural, connectivity and
other reasons, as suggested above.
It is only now, in some countries five years after
the initial MM service launch, that MM agent
networks (much narrower ones than those of
Safaricom) are being re-geared towards bill
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briefing

payment, for which there appears to be a greater

local appetite. If paying an electricity bill requires
going to a limited number of offices of the utility
company and standing in line for an hour or more,
it is no surprise that bill payment can become a
driver of MM services. On the other hand, if bills
can be paid by mail, most grid users have checking
accounts, and there is an effective postal system
(a factor that varies considerably across SubSaharan Africa), then MM may not provide as
attractive a solution.
Overall, the new bill-payment approach brings
new challenges, as it requires the build-up of a
network of payees that accept mobile settlements
for the service to have widespread appeal. It is also
unlikely to be very applicable in rural areas, where
regular bills are not a fixture; for example, most
households live off the power grid and do not have
regular electricity bills to deal with. Safaricom,
meanwhile, now offers numerous MM products,
including person-to-person transfers, bill
payment, onsite payment for goods and services,
international transfers, credit card use and so on.
It has reached a more saturated and mature phase
of development, with its owner, Safaricom, starting
to look for new innovations that will drive the next
stage of product innovation and development.
(According to one source its new orientation will be
IPTV services across multiple platforms. Here,
however, it will face competition from established
players, notably Wananchi, a triple play provider,
and MultiChoice, the satellite TV company; see
Safaricom looks to IPTV for new revenue stream,
Rapidtvnews, November 16, 2013.)

Multiple SIMS, multiple MM accounts

There is another possible explanation for the
discrepancy between MM registrations and active
users. It is likely to apply to markets without a
dominant mobile operator, which is to say most
markets in Africa. Just as such markets often come
with high levels of multi-SIM accounts (prepaid),
they could well push mobile subscribers into
signing up with multiple MM service providers.
Why hold multiple MM accounts if you are an
MM user or potential user (apart from being
enticed into registering for them by bonus-hungry
agents)? There are a number of reasons, including:
l To have access to different agents (for example,
one that is closer to the place of work, another to
a residential location, and a third to a frequent
shopping area)
l To keep personal and business transactions
distinct
l To allow a third-party (friend or family member)
access to one MM account but not others
l To benefit from the differing fee structures of the
different MM providers (eg. Provider A charges
less for international transfers while Provider B
charges less for bill payments)
l To be able to switch to a second MM service if the
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first one is not functioning due to network congestion, coverage,

frequency limitations or for other reasons
l To benefit from the superior fee structure or promotional offers of a
second MM provider after having registered with a prior one
l To have some emergency funds in one account that remains inactive
(pending an emergency arising) while actively using one or more
other MM accounts.
There may also be multiple MM service registrations because
customers are not aware that they can transfer funds to individuals
subscribing to other mobile networks or because doing so involves
extra steps or extra charges. Overall, as with multi-SIM usage,
multiple MM accounts would have the effect of reducing the average
registrants use of MM services and in some cases could result in some
of the registrations remaining effectively unused other than in
unusual circumstances. Again, the smaller the agent networks
involved, the more benefit subscribers would derive from access to
multiple MM providers.

Extending into rural areas

As the agent network widens in a given country and extends to rural
areas, seasonal factors could become increasingly significant as
drivers of MM utilisation and as determinants of periodic nonutilisation. In a farming-based economy, the time when individuals
register for MM service and the time they are paid and need to use the
service can often be separated by more than 90 days, which is the
period that some operators use in defining active MM customers.
Moreover, climate-related conditions for example, periods of heavy
rain can affect both the work/pay cycle and the effective coverage of
mobile networks, especially for networks operating at 1800 MHz as
well as any 3G networks, which generally use the 2.1 GHz frequency
band, and are subject to signal attenuation. (We note that Kenya has
relatively little precipitation compared to most countries in Africa.)
Extending MM services into rural areas will be supported by their
potential attraction as less costly compared to traditional alternatives,
as banks are far and few between and money transfers can involve
considerable personal displacement and significant delivery charges
or transfer fees.
On the other hand, there are countervailing factors as well, given
that rural incomes are generally lower, disposable income is more
limited, mobile phone availability is lower, charging of phones is
challenging, and monthly or other regular bill paying (eg. in areas
that are off the electrical grid, with no utility bills) is quite limited.
Most importantly, the distance to agents is relatively high and the
impact of agents who are unexpectedly absent from their posts is even
greater than in urban areas.
In short, the mobile money story is far from over in Africa. In most
markets it is just beginning to unfold. In fact, there is room for new
stories to emerge, including new models that depart considerably
from the M-Pesa approach in Kenya. Just as the story of the mobile
internet is still at an early stage in Africa, mobile money could take
different and multiple paths as it emerges as a widespread
application in different markets.
The paths will be influenced by the varying economic growth of
different markets, the more uniform demographics (including a
young and relatively illiterate population), differing cultural attitudes,
varying mobile market structures, and legacy forms of money transfer
and execution of other transactions. Much remains to be told.
Kas Kalba is CEO of Kalba International, a digital economy advisor,
which is launching a detailed study of mobile money in Africa. For more
information contact kas.kalba@kalbainternational.com

Winter 2013 Vol 41 Issue 5 | InterMEDIA 29