[From NextBillion.Netblog, 14 May 2012]
M-PESA is a shining, unusual, inspiring success. Yet Amolo Ng’weno (managing director of Digital Divide Data in Kenya, and a former colleague at the Gates Foundation) and I recently reported on the surprisingly infrequent use of M-PESA in most formal business settings in Kenya. Our conclusions are based on a qualitative face-to-face survey of businesses we conducted for the Financial Sector Deepening Trust of Kenya (see full paper here and summarized version here). The contrast between social and business use is stark, and that triggers a number of broader thoughts in my mind.
First, it is a useful reminder that the M-PESA success is moreextensive than intensive. The only astonishing thing about M-PESA is how many people use it. We know that most mobile money customers do only one or two transactions a month – a tiny fraction of all the transactions they might perform using cash. An implication is that an M-PESA-like success is simply not possible in countries with more fragmented mobile telephony markets, unless the providers bite the bullet and interconnect their mobile money platforms.
Second, it might seem paradoxical that adoption of mobile payments in poor countries spreads from social to business applications rather than the other way round. I suppose this is no different than what we’ve seen on the Internet time and time again. Companies build websites that present information that appeals to and connects with individuals (think Facebook and Twitter) first, then find ways to monetize it all by making those connections and the information users exchange useful for business. Most often, business seems to lag personal and social use.
Third, closed-loop (i.e. non-interoperable) payment schemes might work fine in social contexts, but cannot work for business. Companies expect to have a single view of their transactions and consolidated treasury operations. This may explain the previous point: the transition from social to business applications follows the transition from closed services to open platforms. It is urgent for M-PESA to develop application programming interfaces (APIs) and to integrate seamlessly into every bank in the land.
Fourth, if penetrating business with mobile or electronic payments is by necessity a slow affair, the dream of pushing poor economies to go cashless will be, at least for a long time to come, just that – a dream. After all, the bulk of monetary transactions that we engage in on a day-to-day basis have to do with business.
Fifth, M-PESA’s narrow focus on peer-to-peer (P2P) and difficulty penetrating the business user market is consistent with the fact that most successful payment networks and services remain largely specialized. For example, VISA and MasterCard dominate higher-value in-store payments. Western Union has created a very successful franchise in international remittances. PayPal remains most successful in powering e-commerce transactions. In all cases, their brand positioning, service design and pricing structure, which makes them so successful in their core payment market, also makes inhibits these companies from exploiting opportunities in adjacent markets. It is possible that M-PESA might ultimately remain a single-purpose (P2P) payment network.
Sixth, innovation is oh so hard to sustain when you are successful. I am reminded of Timothy Ogden’s comment that microcredit now seems more like a failure because it proved unable to build further financial innovations on the original big idea from 40 years ago. With mobile money, success will increasingly be judged by customer relevance and usage, not just penetration. That will require better integration with banks and microfinance institutions, better application programming interfaces for business IT platforms and solution developers, lower prices for electronic transactions, better dispute resolution processes, enabling more types of transactions, etc.
None of these thoughts are in any way meant to detract from the stunning success of M-PESA. I am just mentally preparing for the inevitable disappointment phase, when things don’t seem to move so fast as we’d hope or expect. Disruptive technologies can be exhilarating, however immersing them more deeply in the market may seem slow in comparison.