Mobile money, evolving fintech: In conversation with M-Pesa 

Following the launch of the State of the Industry Report on Mobile Money 2023, the GSMA Mobile Money Programme has spoken to senior mobile money executives on their view of the state of the industry. We spoke to Reenu Verma, Executive Head of the M-Pesa mobile money service at Vodacom Group. M-Pesa provides mobile money services to over 51 million customers across seven countries in Africa and, through Vodafone’s Kenyan associate Safaricom, M-Pesa now offers mobile money services in Ethiopia, Africa’s second most populous country.

Reenu Verma, Executive Head of the M-Pesa mobile money service at Vodacom Group

What initiatives do you find most effective in increasing women’s use of mobile money?

A good example is the Xitique savings product in Mozambique that we launched a few years ago. When we found out more female mobile money users than men were using this product to save money for a rainy day, the Mozambican team rolled out a series of engagements in Maputo to boost women’s understanding and skills. We have since seen an increase in usage among women.

Another good example is the Mokhatlo group savings product in Lesotho. Traditionally when a group saves money, they’ll put money into a kitty, that is then safeguarded by one person. Then when anyone needs a loan, they are provided one from the kitty and eventually pay it back. We digitised that process and made it more transparent. Everyone in the group has a view of what’s happening with the money. It is safe and there’s a trail of who has accessed what amount and everyone needs to approve withdrawals or transactions taking place.

Do you have any products in the pipeline that meet women’s needs?

While we cannot discuss products in the pipeline, there is certainly a lot we can do for women entrepreneurs such as loans, zero-interest or low-interest long-term loans to women, for example, who make $10 to $20 a week, who don’t have access to a loan facility and who are not able to give credit to their customers. We’re going to keep them in business for longer. This can encourage a shift from cash towards mobile money and give female entrepreneurs the ability to continue operations.

Where has M-Pesa grown in the last year what is driving this?

We’ve seen significant growth in bill and merchant payments and we’re starting to see an uptick in international remittances. I think the COVID-19 pandemic drove people to use mobile money for payments. For example, in Tanzania, people were hesitant to handle cash and so started using mobile money to pay merchants, bills and cable TV (DSTV). The biggest growth driver in the bill payments portfolio across many of our operations was electricity purchase: the ability for customers to now buy electricity tokens via M-Pesa. There was also an uptick in international remittances, especially during the COVID-19 pandemic, with customers sending money to and from various corridors as they couldn’t travel home anymore.

How are credit, debit or virtual cards being leveraged by mobile money platforms?

We offer a Visa virtual card in Tanzania and we’re looking to launch the functionality in Lesotho, the Democratic Republic of the Congo (DRC) and Mozambique. The product is being taken up by customers looking to pay safely for online purchases, they create a virtual card linked to their M-Pesa account and, for example, use it to purchase something on the Apple App Store. Virtual cards are significant because mobile money customers can now access additional products and services.

What do you think will be the key drivers of revenue for M-Pesa in the next few years?

We’re never going to completely move away from our core product portfolio. But diversification is the name of the game: savings, investments, credit and merchant payments are drivers of growth and I believe they will continue to be. In Tanzania, our financial services and merchant portfolios are growing strongly, fulfilling a need for micro-credit and digitising merchant payments. A good example of growth is the Songesha overdraft facility in Tanzania, which is now one of our most popular credit products among our customers.

Merchant payments and e-commerce are another source of growth. Our customers are becoming digitally savvy and we are providing them with an ecosystem that enables digital transactions via USSD or via the M-Pesa Super App. There are lots more relationships we can build to drive ecosystem growth further, for example, with merchants, enabling them to operate continually by providing loans or offering buy-now-pay-later products for goods purchased via M-Pesa.

How do you think mobile money has impacted people’s lives in Africa?

It is a remarkable invention. It is and has been life-changing for a lot of us. Within my family, our domestic helper used to make trips back to her village every weekend to deliver funds or rely on the informal money transfer system. It wasn’t always the safest method. When M-Pesa launched, she set up a mobile money account and learned how to send money to her family in her village, who would then withdraw funds as needed. This shift resulted in tangible savings by eliminating travel costs, reducing potential losses and easing her worries about her family’s well-being.

Our micro-credit products have been revolutionary, especially for our base of pyramid customers. Picture this: a person navigating the daily grind of financial hardship, fighting tirelessly to earn a livelihood. Now, envision them empowered to access an overdraft or a short-term loan facility. This means their children won’t go to bed hungry today and they can run their business without the spectre of exorbitant interest rates looming over them. This is the true essence of mobile money’s might – a force that liberates and uplifts.  

How do you see interoperability evolving in the mobile money industry?

I think interoperability is going to be the name of the game. With national payment switches being implemented across Africa, there will be fewer and fewer barriers to entry because a provider just needs to connect to the switch to access all potential product and service partners.

Interoperability does present challenges if it is not done well or in partnership with the institutions that it impacts. There needs to be dialogue coming from a place of providing mutual benefits and an understanding of Information Technology (IT) complexity and timelines.

The benefits of interoperability outweigh the challenges – there’s potential for an expanded customer base, increased transactions and healthy competition which inspires further investment and innovation. In an interoperable environment, a provider’s differentiation would likely come from offering additional financial services, better services and a diversified and innovative portfolio, which is a win for both the customers and the industry.

What are the regulatory challenges and opportunities for the mobile money industry?

We strive to work with regulators across our footprint for the advancement of the industry and customers. There are times when regulations have been supportive and times where these have posed a challenge.

As an example: consider KYC regulations. When implemented effectively across all stakeholders, these regulations have proven to be instrumental. They empower us to collect precise customer data, fostering an environment of enhanced safety and trust. When regulations are collaboratively rolled out with mobile money providers, they not only align with the government’s mission of boosting financial inclusion but also cater to the commercial sustainability, profitability and investment objectives of these providers.

In Tanzania, regulations posed a significant challenge when taxes were introduced on mobile money transactions. If not well structured, taxation policies can lead to a decline in the value and volumes of mobile money transactions, which is the case in countries like Tanzania, Uganda and Ghana where tax levies are imposed on mobile money transactions.

This change led to a decline in our cash-out and peer-to-peer (P2P) revenue, unfortunately, undoing a substantial amount of the progress we had made in promoting financial inclusion in the country. The reality is mobile money taxation can have unintended consequences for the people who stand to benefit significantly from these platforms. Subsequent reductions in the levies have provided some relief, and we are starting to see customers returning. Interestingly, a similar scenario unfolded in Ghana with the introduction of their own levies.

To learn more about these topics, have a look at our original, supply-side-based research in the GSMA State of the Industry Report on Mobile Money 2023.

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