“M-Pesa is a barometer of what’s happening in the [Kenyan] economy and how customers are behaving.”
That description by Peter Ndegwa, CEO at Nairobi-based tech firm Safaricom, sums up the local dominance of the company’s pioneering mobile money transfer service, considered one of the most successful mobile payment systems in Africa — and possibly the world.
In the wake of the pandemic, there was a 20% increase in the M-Pesa wallet size as customers were saving more due to uncertainty around the crisis, but over time, as the firm waived fees on transactions below Ksh1,000 ($10), the number of transactions per customer shot up from nine to 18.
“It has taken us about 13 years to get to nine transactions, but it took us two years to double that,” Ndegwa told PYMNTS in an interview, adding that it’s one of the reasons why mobile payments are key to growing internet access in Africa — a region where 2G and 3G wireless technology still dominate.
To boost 4G adoption and accelerate internet connectivity across the continent, the M-Pesa pioneer has invested in the rollout of 4G infrastructure, but Ndegwa acknowledged it will require more than simply solving the physical infrastructure and “getting affordable 4G devices into customer’s hands” to achieve that goal.
As a solution, the company has launched both a device financing campaign and the M-Pesa Africa Joint Venture in partnership with Google and Facebook, selling almost 1 million phones last year, he said.
Read more: M-Pesa Partners With Visa for Virtual Card Payments in Africa
And although 5G might be for the long term, the Nairobi-based firm is already conducting trials to prepare for the launch of 5G services in the country, enabling devices to connect better and allowing broadband and Internet of Things (IoT) to work more effectively, according to Ndegwa.
“5G will complement our fiber rollout and allow our customers to have a home connection where we might not be able to reach with fiber and where it might be too expensive to reach with fiber,” he added. “[And] as the cost of devices starts to decline, we believe that there is a real opportunity for the future.”
An “Innovation Mindset”
According to Ndegwa, M-Pesa has accelerated financial inclusion since its launch in 2007, and today, the 15-year-old mobile payment system has 30 million active customers in Kenya alone, with nearly 65% market share as of March 2021.
“We’ve continued to combine technology and innovation to solve customer societal challenges,” he explained. “We are a $2.5 billion revenue business because we have innovated and we invest $350 million every year to keep our network and customer experience at a great level.”
With over 500,000 merchants accepting M-Pesa as a currency to pay for goods and services, the firm has expanded its merchant offering with the launch of a super app for businesses, which today counts 2.5 million active users.
It’s this same success that the firm is looking to replicate across the region, Ndegwa said, starting in neighboring Ethiopia where the firm was granted a telecom license — which does not include mobile money services — in May 2021, the first private telecom license in Ethiopia’s history.
But while the East African country — the second biggest population in sub-Saharan Africa with 115 million people — might be a promising market for growth, its economy is considered among the most closed in the region. For example, as of April this year, a bill aimed at amending the national payment law to allow foreign operators like M-Pesa to offer mobile money services in the local market has yet to be approved.
See also: Amazon, Safaricom Explore Enabling M-PESA Wallets On Amazon
Safaricom will also have to compete against state monopoly Ethio Telecom, the largest mobile operator in Africa in terms of subscriptions with over 58 million subscribers, and its popular mobile service, Telebirr, once it’s given the green light.
But Ndegwa remains optimistic, confident of Safaricom’s ability to overcome those challenges and take mobile financial services to Ethiopia.
“When that [mobile money] license comes, we believe we can create similar success in Ethiopia that we’ve seen in Kenya and in the region. [By so doing, we will] democratize how financial inclusion is delivered and digitize the country in the context of enabling mobile internet,” he remarked.
An Enabling Ecosystem
Back on their home turf, the Central Bank of Kenya (CBK) announced a four-year plan earlier this year aimed at curtailing M-Pesa’s dominance and increasing competition in the country, where the service is used by at least one person in 96% of households.
Related: Kenyan Mobile Service Providers Link With M-Pesa Payments Platform
Until then, the CBK had given M-Pesa a fair amount of leeway to operate with a central bank license rather than a full banking license, but in April it made interoperability a requirement, enabling customers of competing mobile service providers such as Telkom Kenya and Airtel Kenya to pay for products and services through M-Pesa.
Commenting on the move, Ndegwa said they are an open platform and welcome partnerships with other players, pointing to the 42,000 developers who work off M-Pesa application programming interfaces (APIs) to give customers the services they need.
“We are an enabling ecosystem rather than simply a company that is large so we don’t abuse our size,” he said, adding that it’s “also one of the reasons why we are going into Ethiopia because we believe that we can replicate the success that we have seen in Kenya in other countries.”
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