Lessons and Insights of Providing Financial Services to the Underserved through Mobile

CPSS-WB Retail Payments Forum

28th February – Miami, USA

By Betty Mwangi GM – Financial Services

M-PESA: A Global First!

Capitalising on Mobile Technology to deepen access to Financial Services

M-PESA: Changing Lives: Research Facts!

Per transaction customers save: 3 hours per transaction, ploughed back into economic productivity. US$ 3, spent mainly on food and savings .

M-PESA provides greater convenience, speed and lower costs of transferring cash. Just-in-time payments to agricultural or remote areas leads to increased productivity. M-PESA has enhanced personal security as it reduces the need to carry physical cash.

M-PESA provides financial security for women as it gives them an independent place to store

and manage funds.

M-PESA: Changing Lives: Facts!

Over 15.2 Million M-PESA customers conducting over 2 million transactions every day.

M-PESA processes transaction worth USD 4.98 billion annually translating to 17% of Kenya’s Gross Domestic Product.*

Total cumulative money moved in P2P transactions from launch to date is KShs. 1.4 Trillion

which is approximately KShs. 60 Billion per month.

Compared to 1072 bank branches, there are over 35,000 mobile money agents in the country

Over 90% of Mobile money transactions in Kenya are conducted through M-PESA

About 95% of all financial transactions in Kenya are cash based. Of those that aren’t cash-based, it is estimated that 70% of these are handled by Safaricom M-PESA**

*Zimbambwe independent, “Econet’s EcoCash Vs Kenya’s M-PESA,” Oct 20, 2011

* CBK Governors remark at ICPAK Financial Services Conference, April 2011

Financial Access in Kenya

Mobile

Phones only

No Access to Finance or

phones

Banks

Mobile Phones only

No Access to Finance or phones

Mobile Money

only

Adults with Access to Finance

Adults without Access to

Finance

2006 2010

June 2006

Total Population 36.6 million

Population 15yrs+ 20.9 million

March 2010

40.4 million

23.1 million

Banks

*source: World bank estimates,2010

M-PESA users have moved more than Ksh 727.8 Billion (approximately $8 Billion) which is 22%.ofGDP.

Providing the means to access financial services such as savings account/insurance cover/Micro Credit/ Loans

Introduction of lower bands and tariffs to meet the needs of our customers

There has been a significant increase in the number of women using M-PESA. This has led to Financial Independence for the Kenyan Woman

M-PESA: Driving the Agenda of Financial Inclusion

Pilot

2005 2006

Initially for MFI

Loan Repayment

National Launch

2007

Branded as a money transfer service

Expansion of Functionality

2008/2010

IIMT (from UK) Pay Bill, Bulk Payments, M-KESHO

More Innovations

2011

Customer driven needs

What is M-PESA used for?

FSD 2010

Phenomenal Growth!

Mobile Money Market Share

As at 31st December 2011, the reported M-PESA Mobile Active customers are 15.2M 80% of Safaricom’s subscriber base is registered for M-PESA.

* Source: Kenya Assessment Report

Mobile Money agents

35,000

8,600

3,500 5,400

Over 35,500 M-PESA agents countrywide as at 30th December 2011 Agents in diverse sectors such as Supermarkets, Banks, Fuel Stations, Pharmacies and Safaricom Dealers.

* Source: Kenya Assessment Report

% Transaction Value

* Source: Kenya Assessment Report

How has M-PESA managed to stay on top?

Customer focus : M-PESA answers a need in the Kenyan Market

Innovation/ continuous improvement

Driving payments through Partnerships

Driving partnerships with Banking and Micro Finance Institutions

Continuous customer education on new products and services as well as Scam

Education

Regulatory Framework : An enabling regulatory body

Pricing structure

Communication that is well understood and easy to communicate

Resources in the organization – Staff members and management are key

Driving Innovation Through Partnerships

Pay Bill Services (Customer to Business) Over 700 Pay Bill Partners Facilitating payment of regular & utility bills M-PESA to Bank Deposits & Withdrawals. Payroll and Salary Disbursements Payments of goods (Buy Goods)

Partnerships with Corporate organizations

Partnered with over 17 local and international banks

ATM Withdrawals Services

Super Agency M-PESA Prepay Visa card topped

up by M-PESA that allows you to withdraw at VISA enabled ATMs worldwide.

Partnerships with Banks

M-PESA Continuously Changing Lives

Social Focus

Resettlement of post Election Violence IDPs National Famine Relief Fund Water Projects for arid/semi arid areas Gender Violence Recovery Programs Mater Heart Run Kenya for Kenyans initiative.

Lay Away Program (by Kick Start International) Scheme allows farmers to save towards

purchase of irrigation pumps Savings submitted via M-PESA

Kilimo Salama Program (by UAP Insurance) Insuring farmers against crop failure Premium collection and settlements

done via M-PESA

M-PESA making a Mark in Agriculture!

Repayment of Higher Education Loans.

Payment of School Fees

M-PESA and Education! M-PESA making a Mark in Education

Collection of Health Insurance premiums -National Health Insurance Fund (NHIF) and other HMOs

Payment for In and

Outpatient services at Hospitals

M-PESA Grundfos LifeLink Clean & safe drinking

water Reduction in water borne

diseases

Enhancing the Health of our People!

Key Success Factors for Launching an MMT Service!

Agent Network

Robust Platform

Strong Mobile infrastructure

Regulator

Customer Education

Costs relatively cheaper than the alternative

Dedicated management Strong and Trusted Brand

M-PESA Postapay Check Clearing

EFT

Cost of a money Transfer

Ks 30 Ks150 Ks 100 Ks 50-300

CBK has oversight of M-PESA’s work as a money transfer function of Safaricom. Establishes the legal and regulatory framework for payments

CBK determines ‘who can play’ in this space

Safaricom maintains a cordial relationship which is non confrontational and inclusive.

When coming up with regulations, CBK consults Safaricom as stakeholders and uses an inclusive approach.

Proceeds of Crime & AML Act: M-PESA is a reporting institution for AML purposes and updates the regulator on the processes it engages to prevent and monitor AML

Safaricom’s relationship with the regulator

Challenges in setting up an MMT Service

High Set up costs – Initial infrastructure, agent recruitment and customers acquisition costs

Customer Education

KYC & AML– managing compliance for a large customer base

Recruiting and Managing Agent Network – Maintaining quality agents

Regulation

Future for Mobile Money?

Entry by non MNO’s

•Handset manufacturers/ non

telcos/Banks/ independent

companies

Independent solutions

Mobile phone based MMT

applications i.e. Java which are able

to provide MMT

Increased Regulation

•Increased innovation and

increased players may lead to

heavier regulation.

Inter-operability

•Technical inter-operatability

between service providers

THANK YOU THANK YOU