thanks Dave - I missed that, it's a great article. I particular like Paul Makin's observation:
"people felt that M-Pesa belonged to them - it reached out to them - whereas the banks had always been intimidating, demanding people prove themselves before they deserved to be banked... ...welcoming, doing what people actually needed, and it was available where they were, not where we wanted to serve them”.
Milford - thank you for your feedback. My angle in the article is the adoption of M-PESA as a payment system, its scale, how it got there and what makes it successful. It is one of several I am writing about payment systems around the world. Any negative externalities are a separate subject, but leaving them out I can see why you might see the article as unbalanced.
I do have a concern about financial inclusion - I am all for digital payments, they make life much easier, as exemplified by M-PESA, with demand for them from its start. However, many equate financial inclusion with having a bank account, meaning the ability to borrow more, which is what banks want, whether for good or bad (usually for bad, banks encourage or allow people to take out loans without needing them). It would be interesting to know why the % of the banked population increased from 26% to 85% with M-PESA when it can be used without a bank account.
I am also all for cash - it is the only form of money which individuals own and can use freely and it provides a counterbalance to digital payment fees. Norway for example has just 4% cash usage but some of the highest mobile payment fees in Europe, higher than cards - retailers have no option but to accept them.
I am covering payment fees in a later article, including examining the relationship of cash usage with payment fees. Any info you have on them for M-PESA or elsewhere would be welcome, I will reciprocate with anything I unearth.
On the face of it, there seems little egregious with Safaricom when looking at its FY24 annual report (footnote 4). 57% of M-PESA payments and 44% by value are non-chargeable in Kenya - chargeable txns average 1,861 KES, non-chargeable average 1,086 KES, indicating that may be it is higher value txns that incur fees. However, it is unclear what non-chargeable means. Non-chargeable just to the consumer or non-chargeable to the consumer and the retailer (when there is one)? Typically in payment systems, P2P payments are free to both sender and receiver and P2B payments are "free" to the consumer, but incur fees for the retailer, unseen by the consumer.
Dividing the M-PESA revenue (140bn KES) by the value of chargeable transactions (23 trn KES) is 0.6% which is low compared to card transaction fees, and it will include income from all their services and super-app in addition to transaction fees. However, this is just an average, if there is a fixed fee component on transactions, fees on low value transactions could be much higher in % terms, which is a key problem worldwide inhibiting micropayments.
Thanks for this Jeremy, some interesting points made which I will reflect on further. You might check out his post on linkedin I made when I found out M-Pesa was charging a lot to those in Kenya in receipt of basic income grants from the Give Directly people. If they took out a small amount of this cash from their account, so as not to have much money stored at home, they could be charged up to 20% of the value by M-Pesa. That's a lot. I compared this to a community-owned fintech in Brazil, Mumbuca Bank, that charges nothing to facilitate such transfers. It covers its costs from a small charge to retailers that accept its social grants which so many receive so they really do want to exploit the increased demand that arises from such grants.
Milford - attached is my recent analysis of M-PESA (and Airtel) pricing in Kenya - the tiered pricing structure makes paying just above 100 KShs expensive (although free below 100 KShs) and withdrawing cash at an agent for amounts just above 100 KShs is very expensive. At least Airtel (and T-Kash) have introduced some competition.
An interesting report but, as is typical about anything on M-Pesa I'm afraid, seriously unbalanced. Would be good to explain at least a few of the problematic issues that have arisen with M-Pesa - such as the way that Safaricom obtained a monopoly in its early years through a very shady company, Mobitelea Ventures; why so many individuals in Kenya are now overindebted thanks to digital credit; or that Vodafone plc makes huge profits on its 40% shareholding and uses it huge annual dividend flow, essentially extracted from the very poorest in Kenya, to finance its UK telecom infrastructure rather than invest it in Kenya; and that its impact on poverty is now increasingly seen to be negative. Anyway, I'm editing a book for Routledge on fintech in Africa and we have several African authors now exploring M-Pesa and these deeply problematic issues linked to the M-Pesa/Safaricom/Vodafone complex, so any feedback from you would be very welcome as they get writing and I can pass on. In the meantime, my own serious worries about fintech are here: https://www.tni.org/en/publication/the-promises-and-perils-of-investor-driven-fintech
Thank you for this comprehensive update Jeremy.
If you are curious, here's a short piece from the 15th anniversary that talks about M-PESA's origins https://dgwbirch.substack.com/p/a-milestone-for-m-pesa
thanks Dave - I missed that, it's a great article. I particular like Paul Makin's observation:
"people felt that M-Pesa belonged to them - it reached out to them - whereas the banks had always been intimidating, demanding people prove themselves before they deserved to be banked... ...welcoming, doing what people actually needed, and it was available where they were, not where we wanted to serve them”.
It's great wisdom.
Milford - thank you for your feedback. My angle in the article is the adoption of M-PESA as a payment system, its scale, how it got there and what makes it successful. It is one of several I am writing about payment systems around the world. Any negative externalities are a separate subject, but leaving them out I can see why you might see the article as unbalanced.
I do have a concern about financial inclusion - I am all for digital payments, they make life much easier, as exemplified by M-PESA, with demand for them from its start. However, many equate financial inclusion with having a bank account, meaning the ability to borrow more, which is what banks want, whether for good or bad (usually for bad, banks encourage or allow people to take out loans without needing them). It would be interesting to know why the % of the banked population increased from 26% to 85% with M-PESA when it can be used without a bank account.
I am also all for cash - it is the only form of money which individuals own and can use freely and it provides a counterbalance to digital payment fees. Norway for example has just 4% cash usage but some of the highest mobile payment fees in Europe, higher than cards - retailers have no option but to accept them.
I am covering payment fees in a later article, including examining the relationship of cash usage with payment fees. Any info you have on them for M-PESA or elsewhere would be welcome, I will reciprocate with anything I unearth.
On the face of it, there seems little egregious with Safaricom when looking at its FY24 annual report (footnote 4). 57% of M-PESA payments and 44% by value are non-chargeable in Kenya - chargeable txns average 1,861 KES, non-chargeable average 1,086 KES, indicating that may be it is higher value txns that incur fees. However, it is unclear what non-chargeable means. Non-chargeable just to the consumer or non-chargeable to the consumer and the retailer (when there is one)? Typically in payment systems, P2P payments are free to both sender and receiver and P2B payments are "free" to the consumer, but incur fees for the retailer, unseen by the consumer.
Dividing the M-PESA revenue (140bn KES) by the value of chargeable transactions (23 trn KES) is 0.6% which is low compared to card transaction fees, and it will include income from all their services and super-app in addition to transaction fees. However, this is just an average, if there is a fixed fee component on transactions, fees on low value transactions could be much higher in % terms, which is a key problem worldwide inhibiting micropayments.
Thanks for this Jeremy, some interesting points made which I will reflect on further. You might check out his post on linkedin I made when I found out M-Pesa was charging a lot to those in Kenya in receipt of basic income grants from the Give Directly people. If they took out a small amount of this cash from their account, so as not to have much money stored at home, they could be charged up to 20% of the value by M-Pesa. That's a lot. I compared this to a community-owned fintech in Brazil, Mumbuca Bank, that charges nothing to facilitate such transfers. It covers its costs from a small charge to retailers that accept its social grants which so many receive so they really do want to exploit the increased demand that arises from such grants.
https://www.linkedin.com/posts/milford-bateman-616b38_givedirectly-does-what-it-says-on-the-tin-activity-7168266086994452480-WpVC?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAAq8HIB_Xh40OiUhweND5YGp_t0bmKGZ48
Milford - attached is my recent analysis of M-PESA (and Airtel) pricing in Kenya - the tiered pricing structure makes paying just above 100 KShs expensive (although free below 100 KShs) and withdrawing cash at an agent for amounts just above 100 KShs is very expensive. At least Airtel (and T-Kash) have introduced some competition.
https://jeremylight.substack.com/p/price-you-gotta-pay?r=axqgy
Thanks Jeremy, very interesting stuff. Milford
An interesting report but, as is typical about anything on M-Pesa I'm afraid, seriously unbalanced. Would be good to explain at least a few of the problematic issues that have arisen with M-Pesa - such as the way that Safaricom obtained a monopoly in its early years through a very shady company, Mobitelea Ventures; why so many individuals in Kenya are now overindebted thanks to digital credit; or that Vodafone plc makes huge profits on its 40% shareholding and uses it huge annual dividend flow, essentially extracted from the very poorest in Kenya, to finance its UK telecom infrastructure rather than invest it in Kenya; and that its impact on poverty is now increasingly seen to be negative. Anyway, I'm editing a book for Routledge on fintech in Africa and we have several African authors now exploring M-Pesa and these deeply problematic issues linked to the M-Pesa/Safaricom/Vodafone complex, so any feedback from you would be very welcome as they get writing and I can pass on. In the meantime, my own serious worries about fintech are here: https://www.tni.org/en/publication/the-promises-and-perils-of-investor-driven-fintech