M-Pesa mobile money brings African technology to Europe: 'sky's the limit' says founder
African technology has migrated to Europe with the launch of the mobile money technology M-Pesa in Romania. M-Pesa, which means mobile money in Swahili, is credited with transforming the lives of millions of Africans who do not have access to conventional banking services. It uses text messages to send and receive money through mobile phones. Since its debut in Kenya seven years ago, the service has registered nearly 17 million users. Vodafone, the company which developed the technology, hopes it will spark a mobile money revolution in Eastern Europe and in India. RFI spoke to Michael Joseph, the founder of M-Pesa and Vodafone’s director of mobile money.
Is this a first, mobile technology from Africa being exported to Europe?
I’m not sure I would claim it to be the first. It’s the first as far as I know, so I would say yes. Certainly when you look at technology generally coming from Europe or US to Africa, probably it’s the first going from Africa to Europe.
It must make you particularly proud given that you’re an African?
The technology’s not such a big deal. The thing is the actual idea of changing people’s lives through technology that makes me very proud.
You chose Romania because not many people have bank accounts there. Which other European countries do you think you could launch in?
I think it’s very important that you look at it very carefully - it will not succeed everywhere. First you need to look at whether there is a big gap between mobile ownership and bank account ownership. What is that gap, what is the existence of banking infrastructure in the country? So if you look at Romania or most of the east European countries, I think [they] qualify as far as that’s concerned, also where people are still very much used to using cash as the medium, rather than credit cards.
Did you consider using a different name other than the Swahili name M-Pesa?
Yes, tempting. But originally, just as far as India’s concerned, the word pesa actually comes from India. There it’s called paisa, actually in Swahili it kind of changed from paisa to pesa. When we went into India there was a great temptation to call it M-Paisa rather than M-Pesa. But the reason why we stuck with M-Pesa is because at some point in the future, the not too distant future, international remittances will become much more important and therefore if people go anywhere in the world and they see the M-Pesa logo they’ll know they can send money from that location to an M-Pesa customer in Africa, India or Europe.
We launched first in India in February last year. India is a bit more difficult than Africa in terms of regulations. The regulations there are much more entrenched and the regulator is much more cautious there and so we had some regulation hurdles to overcome. I would say it’s still in its infancy and we started it in one area at a time. So we started in Calcutta and then we moved to Mumbai and so on. So it’s still in its infancy, but I think that if you go to India you’ll see the people send money home all the time and it’s quite difficult for them using the banking system. So I think it’s going to catch on, whether it’ll catch on tomorrow or in six months time, that’s still debatable, but it’ll definitely get big there.
You’re just behind Airtel in India, one of the other providers. How significant is this competition between different mobile money providers?
It helps us, it doesn’t hinder us. I think the more operators that use mobile money or want to introduce mobile money, I think that’s a great help for us because it raises the knowledge about it amongst customers. They start to become much more aware about what mobile money is. Then we also have a joint or a common front to talk to the regulators to allow us to move money across the country. Because regulators worry about money laundering, terrorist funding and all that, but we are moving very small amounts of money. You still need to persuade the regulators to allow us to do this and therefore I think having competition also using mobile money helps a lot.
This is quite a sore point for me, so I have to be careful what I say here. I think originally when they launched they did not take heed, or follow the mistakes and the lessons we had already learnt in Kenya and Tanzania. So they launched an M-Pesa product which they launched to the entire population rather than focusing on the bottom of the pyramid. This was the big mistake here. They said M-Pesa is everybody, now it’s not for everybody in the beginning. In the beginning it’s designed for people at the bottom of the economic pyramid, people who don’t have access to bank accounts, debit cards, internet or things like that. So you need to focus on that market segment and then as that market segment adopts it the rest of the market slowly begins to adopt it. So, I think they just didn’t focus it enough. Secondly, one of the most important things about M-Pesa - believe it, there are over 250 mobile money operations around the world today, of that only 10 are really successful, recognised by the GSMA (Groupe Speciale Mobile Association) – the key success factor of M-Pesa is a massive distribution network, where the ordinary person, if he receives money or wants to send money, can just walk down the street to a Mom and Pop store that offers him this cash-in, cash-out facility. In South Africa when they launched they didn’t have a big distribution network and that was a big mistake.
You’re already in several African countries. Do you have plans to launch M-Pesa in more African countries?
We will launch M-Pesa wherever Vodafone is in Africa. So the only country in Africa where we have not launched M-Pesa is Ghana. That is probably coming on-stream in the near future.
In some way you’re cutting out the banks and payment providers. Do you think they’re concerned that they’re being made redundant?
No, I don’t believe so. In the beginning that’s how traditional banks reacted, saying you’re taking business away from us. But actually we are not. Banks really cannot compete where we are at the bottom of the pyramid. The average transaction value is about 10 dollars. To move 10 dollars for a bank from one customer to another is quite expensive. For mobile money operators it’s not so expensive. Because also we’re basically data and voice providers, mobile money is a value-added service for us to get loyalty from our customers. We don’t have to make huge amounts of money from it. So we can subsidise it or keep it at a very low rate. We’re not really competing with the banks at the bottom of the pyramid. We’re not moving thousands of dollars per customer. We have strict limits from the regulators, how much money customers can send per day, per week or per month. So we’re not really competing with banks. Also banks, to a large extent, particularly in Africa, they’ve withdrawn from the rural areas, because it’s very expensive to have traditional banking bricks and mortar in rural areas. So they’ve withdrawn from there, we are filling the gap that they’ve left behind.
Where do you see payments technology going in the future?
I think as people start to get used to using the mobile phone as their mobile wallet, I think the usage will only grow. More and more people will use it for more and more things. Where will it end up, I do not know. At my level, when I’m looking at M-Pesa, where can we take M-Pesa? I think we can take M-Pesa a long, long way. In two countries, Tanzania and Kenya, we’ve launched savings and loans. People can save as little as 1 cent, even 1 euro cent into a savings account free of charge, earn interest and then after a certain period of time they can borrow money, a multiple of their savings. The savings and loans become very big, micro insurance will become very big part of it, micro health insurance and special wallets such for health insurance. Say for instance when a woman gets pregnant, she can start to save tiny amounts of money into a specific wallet that she can use just for antenatal care or when she goes to the hospital to have her baby. The sky is the limit. So I think as people get more comfortable using their mobile phones as a payment instrument I think you’ll start to see less and less people carrying around big wallets full of credit cards and debit cards.
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