At a press conference today, Zain announced the launch of its award-winning, enhanced payment service ZAP in Ghana. The service is set to compete for the custom of the Ghanaian “unbanked” with MTN’s Mobile Money.
The development of mobile payment mechanisms in the Ghanaian market for value-added mobile services, alongside with the evolution of the local market information platform Esoko, makes mobile commerce in Ghana an increasingly realistic prospect.
The mobile phone has become one of the most important pieces of equipment that has revolutionaised processes in the society, making people transact business and communicate in a friendly and more convenient way.
Not only have authorities predicted the continuous revolution in the sector, but they believe Africa, which was written off as one that could not realise the full benefit of the technology, will now be at the centre of the mobile phone revolution, using the device to facilitate trade and the settlement of values beyond its traditional use as a communication tool to which the device is put in many parts of the world.
Leading the mobile revolution in Africa and the Middle East is Zain Telecommunications which continues to use veritable market survey to design products and services on its platform to the benefit of the ordinary person and businesses.
The telecom service provider has introduced onto the Ghanaian market its award-winning mobile commerce (m-commerce) product, the Zap service, which is set to make business transactions on all platforms easier by enabling users to access funds from their bank accounts and pay utility bills using their mobile phones.
ZAP has been extensively reviewed and approved by industry experts across the world as an efficient way of doing transactions. The product is the reigning winner of the coveted award for Best Mobile Money for the Unbanked Service at the GSMA Global Mobile World Awards 2010.
The Country Manager of Zain, Mr Philip Sowah, explained that the service went beyond money transfer into enabling users of the service to effect payment of any kind be it a bill at a grocery, utility bills, pay-TV bills, school fees, or even to honour pledges and tithes at church.
“This service will enable people to transact business and make payments without resorting to cash,” Mr Sowah explained, adding that although the service would initially be available to Zain customers, it would later rope in other platforms.
Currently, Zain is working in partnership with three banks, namely Ecobank, Standard Chartered Bank and UBA to deploy the service with the hope that after the launch other banks would be roped in.
With its authentic ability to capture people in the informal sector, who would load cash on the service for transactions, the product would help in banking a lot more people in that sector, thus help in mopping up excess money in circulation, a condition necessary for checking inflation. Currently, only 80 per cent of the Ghanaian working population is unbanked. This means a teaming number of people in the informal economy remain unbanked.
“The unbanked will become banked under Zap and enable banks to have access to more customers,” Mr Sowah added, adding that the general economic and business benefits of ZAP were astounding and would further revolutionarise commerce in Ghana.
How it operates
Customers of the network will first have to register with the mobile provider before being able to access their Zap service. The customers can send money from their bank account to ZAP account or go to the nearest Zain dealer or Zap centre to deposit cash onto their Zap service to enable them to send money from ZAP to a bank account, send virtual money to friends and family, receive virtual money or withdraw cash.
Mr Sowah said “money can be redeemed from any ZAP outlet or Zain accredited shops all over the country.”
On another level, merchants and service providers who would be signed on would also have their Zap account which would facilitate a unique settlements system that would facilitate the exchange of goods and services to take place.
For instance, at the Accra Mall, all the big and small vendors would have the service which would allow customers to buy from say game supermarket and pay through the Zap service.
It can also work in informal economies such as at traditional markets in Ghana such as the Makola market in Accra, the Asafo market in Kumasi or the Techiman market in the Brong Ahafo Region.
For money transfer, the upper limit is GH¢600 a day, while transactions with merchants could go beyond that to bigger amounts, in an attempt to check fraudulent deals with the system, such as money laundering.
Convenience
Besides the multi-faceted services it offers, Zap also promises convenient and a cost efficient way of transferring money; or for the payment of goods and services in the Ghanaian market.
Zain officials said there would be no need for any special subscriber identity module (SIM) card or customers to begin to enjoy the ZAP service. In addition, however, customers who would use ZAP would be allowed to keep their phone numbers confidential with the use of ‘nicknames’ to transfer money.
The service could also be used to top up airtime for the customer or for someone else.
Security features
The company stressed that since Zap operated in a ‘virtual’ world of transacting business without carrying cash, theft cases and armed robbery would be drastically reduced, citing building contractors as an example of a category that could “Zap” workers’ wages directly to their handsets without carrying sack loads of money.
The workers could later redeem the cash at the ZAP outlets doted all across the country, Mr Sowah explained.
The ZAP service is currently in Uganda, Tanzania, Kenya, Malawi, Niger and Sierra Leone.
Presentation by Jan Chipchase at the Mobile Money Conference, Dubai, October 26th 2009. Who benefits more from the introduction of mobile phone banking services – a white-collar worker in New York City or a migrant manual labourer living out of a dormitory in Xi’an? Design research for Nokia Money.
This paper by Jan Chipchase applies the lessons learned from of a number of qualitative research studies into communication practices, mobile phone use to the design of mobile money services.
ONCE the toys of rich yuppies, mobile phones have evolved in a few short years to become tools of economic empowerment for the world’s poorest people. These phones compensate for inadequate infrastructure, such as bad roads and slow postal services, allowing information to move more freely, making markets more efficient and unleashing entrepreneurship. All this has a direct impact on economic growth: an extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points, according to the World Bank. More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world see our special report. Even in Africa, four in ten people now have a mobile phone.
With such phones now so commonplace, a new opportunity beckons: mobile money, which allows cash to travel as quickly as a text message. Across the developing world, corner shops are where people buy vouchers to top up their calling credit. Mobile-money services allow these small retailers to act rather like bank branches. They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account. You can then transfer money (again, via text message) to other registered users, who can withdraw it by visiting their own local corner shops. You can even send money to people who are not registered users; they receive a text message with a code that can be redeemed for cash.
By far the most successful example of mobile money is M-PESA, launched in 2007 by Safaricom of Kenya. It now has nearly 7m users—not bad for a country of 38m people, 18.3m of whom have mobile phones. M-PESA first became popular as a way for young, male urban migrants to send money back to their families in the countryside. It is now used to pay for everything from school fees (no need to queue up at the bank every month to hand over a wad of bills) to taxis (drivers like it because they are carrying around less cash). Similar schemes are popular in the Philippines and South Africa.
Banking on it
Extending mobile money to other poor countries, particularly in Africa and Asia, would have a huge impact. It is a faster, cheaper and safer way to transfer money than the alternatives, such as slow, costly transfers via banks and post offices, or handing an envelope of cash to a bus driver. Rather than spend a day travelling by bus to the nearest bank, recipients in rural areas can spend their time doing more productive things. The incomes of Kenyan households using M-PESA have increased by 5-30% since they started mobile banking, according to a recent study.
Mobile money also provides a stepping stone to formal financial services for the billions of people who lack access to savings accounts, credit and insurance. Although for regulatory reasons M-PESA accounts do not pay interest, the service is used by some people as a savings account. Having even a small cushion of savings to fall back on allows people to deal with unexpected expenses, such as medical treatment, without having to sell a cow or take a child out of school. Mobile banking is safer than storing wealth in the form of cattle (which can become diseased and die), gold (which can be stolen), in neighbourhood savings schemes (which may be fraudulent) or by stuffing banknotes into a mattress. In the Maldives many people lost their savings in the tsunami of 2004; it hopes to introduce universal mobile banking next year.
Financial innovation has a bad reputation at the moment, because exotic derivatives were one of the causes of the credit crunch. But mobile money and other new ideas that could help the poor (see article) provide a useful reminder that financial innovation in itself is not always a bad thing.
Given all of its benefits, why is mobile money not more widespread? Its progress has been impeded by banks, which fear that mobile operators will eat their lunch, and by regulators, who worry that mobile-money schemes will be abused by fraudsters and money-launderers. In many countries mobile money has been blocked because operators do not have banking licences and their networks of corner-shop retailers do not meet the strict criteria for formal bank branches. And some mobile-money schemes that have been launched, such as one in Tanzania, failed to catch on. As recently as a year ago people wondered whether M-PESA’s success was a fluke.
Out of Africa, always something new
But in recent months there have been some more hopeful signs. Kenya’s success story has demonstrated mobile money’s potential, and its benefits are starting to be more widely appreciated. More enlightened regulators are no longer insisting that these services meet the rigid rules for formal banking. Some banks, meanwhile, have come to see mobile money not as a threat but as an opportunity, and are teaming up with operators. And phone companies have studied Kenya closely to learn how to establish and market a successful mobile-money scheme. MTN, Africa’s biggest operator, has launched a mobile-money service in Uganda in conjunction with Standard Bank; it appears to be doing well. MTN is fine-tuning its service in Uganda before rolling it out across Africa.
Banks and regulators elsewhere should take note. Instead of lobbying against mobile money, banks should see it as an exciting chance to exploit telecoms firms’ vast retail networks and powerful brands to reach new customers. Tie-ups between banks and operators will help reassure regulators. But they, too, need to be prepared to be more flexible. People who want to sign up for mobile-money services should not, for example, have to jump through all the hoops required to open a bank account. Concerns about money-laundering can be dealt with by imposing limits (typically $100) on the size of mobile-money transactions, and on the maximum balance. And inflexible rules governing the types of establishments where cash can be paid in and taken out ought to be relaxed.
Mobile money presents a shining opportunity to start a second wave of mobile-led development across the poor world. Operators, banks and regulators should seize it.
Having recently posted on mobile money and Safaricom’s M-Pesa and its current financial well-being I am convinced of the long term viability of services such as the popular and successful M-Pesa in Kenya. In my posts I have touched on the topic of regulation and the convergence of the telecommunications industry with the banking sector. So, I was very interested to find the news item below via the Wireless Federation. Unfortunately, it appears that topics such as fraud and identity theft which have become common themes in discussions of online commerce are unlikely to spare the world of mobile communications. Regulators in Kenya have taken a stance and seem to have established a registration requirement for mobile subscribers.
July 24th, 2009
Safaricom has endorsed recent presidential directive requiring all mobile phone subscribers to be registered, a way to curb criminal activities. The firm said it would support the efforts being undertaken to improve the security of citizens.
“An enabling law will certainly give us the much-needed legal muscle to extend this to our entire network. It would map out how these records are to be used and give us the legal right to ask our subscribers for their details,” said Chief Executive Officer Mr Michael Joseph.
The process is expected to complete within six months with the Communication Commission of Kenya spearheading the efforts.
“We need to do this as a country. Safaricom already has over half of our subscriber base registered through our M-PESA and PostPay services and the popular Bonga loyalty scheme, for which registration is a standard requirement,” added Mr Joseph.
“Registration is no panacea to our crime problems and it can never be surrogate to professional police investigations. As is stands, criminals will always steal phones and even identities of innocent people, but it is a necessary first step in helping us combat the recent upsurge of mobile-phone related crime. At the end of the day, crime is a societal problem whose conquest requires the concerted efforts of all. At Safaricom, we have always played our part and that will continue,” said Mr Joseph.
Continuing the theme of alternative payment systems, and particularly the recent posts and discussions of the M-Pesa success story in Kenya, here is an interview panel on the topic, provided by TelecomTV’s programme Main Agenda.
The discussion took place during 16-19 Feb at the Mobile World Congress in Barcelona. The panel features Mr. Gavin Krugel, Director Mobile Money, GSMA Association who articulates the major commitment of mobile network operator groups such as Orange, MTN and Vodafone behind financial service offerings. Network operators value the added value of such services alongside their standard offerings of SMS, voice and data.
He illustrates the scale of the opportunity offered to network operators in mobile money with the fact that 1 billion consumers in developing markets who do not have a bank account but do have a mobile phone. As a further illustration, a leading financial institution in India has 10 000 branches, while a leading network operator in India has 1 million distribution points. Through their network brands, innovation and secure technologies, mobile network operators are uniquely positioned to meet the opportunity and respond to the need for entry level financial services.
Mr. Vitalis Olunga, Head of International Services, Safaricom presents the opportunity of extending the M-Pesa mobile money concept of Safaricom, Kenya to include cross-border roaming services. He addresses the issue of regulation which came up in my posts from last week. Mr. Olunga tells how when M-Pesa was started in Kenya there was no regulation and the policy was developing post-factum. He sees a considerable challenge for the regulators in distinguishing between telecommunication and financial services. Additionally, mobile money increases the levels of competition in two highly regulated sectors in developing countries: the telecommunications and the financial sectors.
Mr. Hans Paulsen, CCO, Uganda Telecom shares his views regarding mobile financial services. He presents the opportnity present in Uganda to increase the current number of bank customers from 200 000 to 8 000 000 mobile phone users. The main application area Mr. Paulsen considers is that of remittences between urban and rural areas. With regards to regulation he stresses that success stories such as M-Pesa raise questions for telecom regulators and the banking sector regulators.
Mr. Patrick Kariningufu, Rwandatel emphasises that M-Pesa “was a great idea 4 years ago” and currently Rwandatel are looking for ways to enable people in the diaspora to transfer payments to African countries. Mr. Luckas Scoczkowski, CEO, Redknee presents their portfolio including re-sell airtime, emergency airtime, international remittances, and crossborder money transfers.
In a recent post I noted the news about Safaricom’s profitability in the last year and exchanged some thoughts about the services, fair pricing and values provided by African mobile operators with Steve Song.
Eariler this week I came across the Round. The world. Connected. project of the Nokia Siemens Networks. In its Episode 2 finds Adrian Simpson visits Ethiopia and Kenya. Among the bonus features are an interview with Mr. Michael Joseph, CEO of Safaricom, interviews with users and providers of the M-Pesa service.
Mr. Michael Joseph introduces the needs and benefits of the M-Pesa service, emphasizing its value outside the main urban areas where banking infrastructure is rarely available. He recounts the origins of the M-Pesa service in 2006 within a microfinancing project and explains its current popularity. By saving users the hazards of carrying and transacting in cash M-Pesa allows its users greater degree of mobility and flexibility. Mr. Michael Joseph stresses that M-Pesa is a banking product. This complicates the service by imposing strict security requirements on the technology, five-year record keeping requirement, and customer rules.
Mr. Michael Joseph emphasises the importance of the distribution and support network for the M-Pesa service. He acknowledges that Safaricom’s ARPU is decreasing and explains Safaricom’s strategy to “lock-in” customers through the provision of a mobile banking service which can be perceived as a daily necessity. Furthermore, Safaricom counts 7500 franchises of M-Pesa stores where users of the service can receive personalised support and loyalty to Safaricom can develop as a result of the social capital exchanged in between the users and the representatives of the distribution network. Adrian Simpson gives faces to the M-Pesa distribution/ support network by interviewing an M-Pesa store owners.
In the video “The benefits of M-Pesa and mobile banking in Africa” Adrian Simpson shows documents used in the registration for use of the service and talks to an M-Pesa dealer who claims thousands of customers visiting his shop. The location seems fairly central and the customers appear “upmarket”. He mentions businesses and university students as his customers.
In “Interview with an M Pesa store owner in Africa” Adrian Simpson talks to Joseph, an M-Pesa agent working in somewhat more moderate surroundings. He emphasises customer service, technology assistance and personal attention as important considerations for keeping his customer base.
Towards the end of the interview with Mr. Michael Joseph the subject of regulation is brought up. Not surprisingly, Mr. Michael Josephs mentions that mobile operators in Africa are seen as “cash cows” and a reduced tax burden would help help their work. Still, I wonder how regulation can be used in order to provide mobile operators with the incentive to support, invest in and develop socially benefitial services. M-Pesa seems to facilitate the monetary transactions of socially excluded people and it appears to alleviate concerns related to security. As such, the service has required considerable investment in technology development and the set-up of a distribution network. With considerable set-up costs, the service has broken even only recently after subscribing 6 000 000 users in December 2008. Admittedly, Safaricom has invested in it with strategic self-interest, looking towards customer loyalty and “lock-in” opportunities. Still, I wonder how governments cound encourage mobile operators to behave in a similar way, rather than to follow more disruptive strategies. If we view mobile services like M-Pesa as social goods, rather than luxuries, how can regulation be used to have more of them?
Below I am reprinting a news report by Martyn Warwick , published at TelecomTV | News on 22 May 2009. The report covers thereduction of profits by 23%, announced by Kenya’s and Africa’s biggest mobile operator Safaricom. Alongside with the reduction in profits, the story mentions the significant annual growth in the number of registered users for Safaricom’s M-Pesa mobile money transfer service. The number of registered users for M-Pesa increased from 2.1 million to 6.1 million. Both of these news from Safaricom in Kenya indicate the relevance and timeliness of the revenue opportunities offered to African mobile operators by mobile market services.
More evidence today that the recession is a truly global phenomenon. While in the developed economies of North America, Europe, Japan and Australasia ARPU has been falling and sales of handsets are in decline, over in the burgeoning markets of Africa, (Egypt, Nigeria, South Africa and Kenya, for example) the mobile industry has continued to roar ahead -until today. Martyn Warwick reports.
But today comes news that, for one carrier at least, the economic downturn has now hit home and profitability is on the wane at Safaricom of Kenya, Africa’s biggest mobile carrier.
Mobile penetration in Africa has roared ahead in recent ayears and some industry observers had opined that companies like Safaricom might continue to grow despite the recession. It seems now that this has more to do with wishful thinking than dispassionate analysis.
Figures released this morning show that Safaricom’s full-year profits slid by 23 per cent – mainly because of the prevailing economic conditions but increased competition and increased costs of servicing debt have also played their part.
For the financial year ended 31 March Safaricom made a profit of 15.3 billion Kenyan Shillings – that’s about £126 million Sterling. For the previous year ended march 31, 2008, the company made 19.9 billion Shillings in profit.
Perhaps more worrying is that although the operator’s total revenues were up 15 per cent year on year, ARPU (globally accepted as being a major indicator of performance) is in serious decline have fallen by a massive 23 per cent to 475 Shillings a month.
Over the past 12 months Kenya has suffered remarkably high inflation as the national currency has weakened and the costs of basic foodstuffs, fuel and transport have rocketed. Kenyan consumers, the vast majority of whom are far from wealthy, have less disposable discretionary income than they did 12 months ago and they are using their phones less.
Confidence was also severely dented by the ethnic violence that followed the results of the disputed 2008 general election and that has had a long-term effect on the economy.
Safaricom has been one of Africa’s great success stories. It is the biggest company in East Africa, is valued at in excess of £1 billion, has 2,300 employees and 13 million subscribers. The company is 40 per cent owned by Vodafone, 25 per cent by both private and institutional investors and 35 per cent owned by the Kenyan state.
It has a market share of 79 per cent and has increased its customer base by 31 per cent over the course of 18 months.
However, the market is changing and Safaricom faces increased competition from a raft of rivals including Essar telecom’s “Yu”, Zain of Kuwait and the Orange network of the incumbent, Telkom Kenya. As a result of this intense competition mobile tariffs have fallen by 40 per cent in just a year.
Commenting on the results, Safaricom’s CEO, the amiable and approachable Michael Joseph said, “It was probably our most challenging year in terms of operating environment. But it’s not all gloom, we have delivered strong results despite the difficult economic conditions and there has been strong growth in the popular M-Pesa money transfer services, with 6.2 million registered users now compared to the 2.1 million of the previous year.”
The CEO added that Safaricom will continue to invest in its network and will also look to acquisitions to maintain its strategy for consistent growth. Mr. Joseph said, “Our capital expenditure is expected to remain high over the next few years as we continue the roll out of our data infrastructure and continue to invest in the capacity, coverage and quality of our network.”
Meanwhile, Richard Hurst, a senior telecoms analyst at research house IDC commented, “In the past, Safaricom has been quite a solid operator, usually coming up with some decent numbers, so it is a bit of a surprise,” and added that Safaricom will have to spend big money on enhancing and expanding its infrastructure if it is to fend off competition and maintain its Number One position.
Hurst believes though that the overall African telecoms will continue to grow at rates higher than in other markets. He says, “We’ve still got some quite substantial growth to go, it’s [the African market] not as saturated as the European, North American or even Asian markets. I think this is just a blip.”
Let’s hope so. New figures from Nigeria expected to be published in the coming weeks may show whether this is indeed a “blip” confined to one company in one country or if the malaise is spreading across Africa.
ZAP has been extensively reviewed and approved by industry experts across the world as an efficient way of doing transactions. The product is the reigning winner of the coveted award for Best Mobile Money for the Unbanked Service at the GSMA Global Mobile World Awards 2010.
MMD4D 