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Safaricom goes after payment cards, targets SMEs with "Lipa na M-Pesa"

Safaricom on Monday hosted the press and a section of their enterprise clients to the relaunch of M-Pesa payment solution, dubbed "Lipa na M-Pesa". M-Pesa is heavily used in Kenya, by the end of 2010, two-thirds of Kenyans above the age of 15 years were using mobile money. The country had a population of just under 40 million with about 23.1 million people aged 15 and above in 2010. In June 2010, Safaricom announced that it had 10.2 million M-Pesa users, who have now grown to over 17.1 million in three years. Safaricom is now looking to make more out of these users with its revamped payment service dubbed "Lipa na M-Pesa". 

Every month, KSh. 70 billion is transferred between M-Pesa users on average. Launched six years ago on March 6, 2007, M-Pesa has seen KSh. 2.3 trillion transferred between users, enough to fund Kenya's KSh. 1.6 trillion budget and have KSh. 0.5 trillion left over. The amount of money passing through the service is equivalent to 43 percent of Kenya's gross domestic product - the value of goods and services produced in a day (GDP).

The impact of the service is hugely felt across the country. Safaricom CEO, Bob Collymore, proudly quotes Central Bank of Kenya(CBK) figures that show financial inclusion (number of people with access to some form of banking) in Kenya stands at 80 percent, a figure which drops to 23 percent without M-Pesa.

In 2006, 40 percent of the population were using other people (hand to hand) for money transfers while 20 percent used buses. This currently stands at 32 percent for hand to hand and 9 percent for bus.

The number of women using M-Pesa has increased from 38 percent in 2008, to 44 percent in 2009 and 51 percent in 2010. At the launch held at the Michael Joseph Centre, named after Safaricom's first CEO, who currently heads the M-Pesa unit at Vodafone, Collymore narrated how current Nairobi Governor, Dr. Evans Kidero, then Mumias Sugar company CEO, signed an agreement with Safaricom in 2008 to pay salaries via M-Pesa. The money was sent to the workers' wives at home, which enabled better financial management. Before, Collymore says the wages would be spent in a day, repaying items bought on credit through the month, with the balance spent in drinking joints.

Safaricom has had a "Pay Bill" feature for a number of years, where users could conduct various services such as pay their electricity and water bills and even repay their university loans. The service had a fee charged on the users for each transaction.

At an Institute of Certified Public Accountants of Kenya (ICPAK) financial services conference,CBK governor, Professor Njuguna Ndung'u remarked that  95 percent of all financial transactions in Kenya were cash based, of which 70 percent of non cash-based, transactions were handled by M-Pesa.  Safaricom is now looking to grow M-Pesa beyond peer to peer money transfer to a service that enables Kenyans to pay for good and services from their phone.

With Lipa na M-pesa, Safaricom is doing away with the fee it was charging users for paying bills. Instead, merchants will be charged a 1.5 percent  fee per transaction, which Collymore points out is less than the 3 to 5 percent businesses are charged for processing credit and debit cards.

Additionally, Betty Mwangi, Safaricom's General Manager Financial Business Services says the firm is looking to recruit 100,000 businesses by April 2014, at the rate of 1000 per week. Small and medium enterprises, including salons, bars restaurants, butcheries, spare part shops, kiosks, public transport operators and other merchants in the jua kali(informal) sector are all being targeted. Safaricom will join four other aggregators, including KopoKopo, which has mostly been recruiting restaurants, in recruiting these businesses. The mobile operator is looking at using over 65,000 M-Pesa agents to recruit small businesses countrywide.

In addition, the process has been simplified to target Kenya's predominantly informal sector, while keeping in line with "know your customer" requirements. In addition to a form that can be downloaded from Safaricom's website, business will need a Personal Identification Number, the business owners National ID and a trading license to sign up for the service.

Already, 1,600 businesses have been accepting M-Pesa through the Pay Bill utility.

Collymore says that M-Pesa's new bill payment feature is competing with cash, rather than banks. That will be hard to swallow for banks. Equity Bank is in the process of rolling out near field contact (NFC) enabled cards and points of sale targeting SMEs and has rolled out a public transport payment card in partnership with Google. The bank's CEO, James Mwangi, has been openly against Safaricom's venturing into what he sees as bank's business.

Barclays Bank executives have also pointed out at the unfair playing ground that pits them against an unregulated service and in addition, warned of the risks of such a large service as M-Pesa being unregulated.

With the huge success of M-Pesa, the banks have had no option other than to partner with service, despite being portrayed as willing partners.

The government shows no signs of regulating M-Pesa, rather being more keen in taxing the more than 2 million transactions done on the service daily.


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