M-Money reaches critical mass of users in East Africa – Where next?

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The close of 2009 saw M-Money services finally reach critical mass in East Africa. It’s taken a while for operators to get the hang of marketing it and for users to become comfortable with the idea of transferring money that isn’t cash. Russell Southwood looks at the lessons learned in the process and asks where next for this compelling set of services.

Just before Christmas the total number of M-Money users in Tanzania passed the 1 million mark and in Uganda it reached just over half a million. Kenya, the long-standing pioneer, has now reached 7.6 million users and that figure does not include subscribers from Orange Money and its Zain rival Zap (400,000). Eassar’s yuCash is also set to launch sortly. Each of these country markets has reached a critical mass of users.

This critical mass is the key point where the number of users becomes sufficiently high that existing customers draw in ever larger numbers of people on the basis of the users asking others the simple question” why aren’t you using it? For Kenya, where the data for M-Pesa is available on a month-by-month basis, six months after the launch there were 591,200 users. Only two months later the figure tipped the million mark and the rest is history, slightly under doubling at that point.

M-Pesa was tried and tested after Kenya but newer products like MTN Money and Zap were new to the market. In Uganda, MTN Money has 413,000 users after 10 months and is now signing up around 2,600 new customers every day and projects having a million plus customers by the end of 2010. Zap Money which has only been going for 6 months is approaching the 100,000 mark in Uganda and passed it several months ago in both Kenya and Tanzania.

For MTN Money, the key to making it move has been having a direct sales force with 760 people out pounding the streets on a daily basis. The key to the service’s breakout has been to use this street sales force to explain the service to people and to get them registered: subscribers need to be able to have proof of identify to meet Know Your Customer (KYC) banking regulations.

George Boozas, who heads up Zap, makes the same point:”We have to engage our customers on the ground and continuously educate them. We have sales people who pitch up in a particular area and explain the service. We’re also using our 30,000 sub-dealer outlets to explain the service as well as the experiential teams.”

In addition, MTN has 606 agents, of which there are 26 super-agents who run 200 of these 606 agents. Zap has 3,000 dealers and believes that there is still room to grow this network: like MTN it has within that network a number of super agents who run chains of agents. Kenya’s Safaricom has 12,000 agents and is introducing a Aggregator model so that it can pass off dealing directly with so many agents to agent management companies (See On the Money section below). By contrast Zain has 6,000 agents and Essar plans to recruit 3,000 agents.

The average transaction for MTN Money is USh70,000 (US$36) and the maximum limit on a transaction is USh1 million (US$514). It is working with the Central Bank of Uganda to move the upper limit to USh50 million (US$25,720). Zap works to the same USh1 million upper limit and is handling just under 12,000 transactions a day with a lower average transaction of around US$15.

M-Money services don’t stand still. MTN Money is looking at announcing payment for utility bills by Q1 of this year. Zap is looking at integrating the service with bank account transactions and also finalising talks with utility companies. But the next big front opening in the M-Money war is international transactions to enable the diaspora community to send money home.

Back in October 2009, Safaricom launched m-pesa at selected outlets in the UK. Kenyans in the UK can now send money to their friends and family in Kenya through M-pesa UK, direct to their mobile phone wallets. Western Union, Provident Capital Transfers and KenTv were involved in a small pilot before the commercial launch of this service. A total of 19 outlets in areas with high local Kenyan population were selected to trial this service.

The transaction fee ranges from £4 to £6.90. Since transaction costs globally vary between 6-17% of the transaction, these charges will only be economic for larger trasactions. It has plans to add international remittance services to other countries. Currently, the maximum amount that can be sent internationally per transaction through M-pesa is £250 while the total allowable per month from a single sender in the UK is £1,000.

But closer to home, M-Money services may now gain wider traction. Zap is now established in Zain’s East African country markets and will rolled out in all 22 of its country territories by the end of 2010. According to Boozas:”Nigeria is as good as launched and three others will follow after that.” Two of these are Sierra Leone and Malawi where a pilot is currently on-going. MTN has launched in Uganda and Ghana and will soon launch in Rwanda and into its other country markets. Orange Money has been launched in Cote d’Ivoire and Kenya and like the other companies, it has plans to roll out across all of its African operations.