Vodacom rings changes with its M-Pesa service

13 Jun.

Vodacom M-Pesa cellphone payments service.

Vodacom will target a new market segment to grow its M-Pesa cellphone money service* after a dismal start six months ago.

Pieter Uys, Vodacom’s group chief executive, said last month at the cellular network operator’s year-end results that M-Pesa’s launch in South Africa had been “disappointing”, compared with other countries such as Kenya and Tanzania, where its rapid uptake and strong growth had translated into more than a million users. There are only 140 000 registered M-Pesa users in South Africa.

Mark Taylor, the managing executive for Vodacom strategic products, said at the weekend that Vodacom, through incorrect marketing, had created misconceptions of M-Pesa and having learnt its lesson, was chasing new customers in the higher living standards measurement (LSM) brackets.

Taylor said the first mistake had been to flight an advert which depicted two African women receiving money and redeeming the cash at a spaza shop. The advert created the perception that the product was targeted at people in lower LSMs and rural areas.

“We didn’t realise the impact that would have on perception,” he said.

He said Vodacom had also resolved to make the M-Pesa process easier to use. It is also working on launching M-Pesa in Mozambique and Lesotho.

M-Pesa is a cellphone money product Vodacom offers using Nedbank’s banking infrastructure. FNB, Standard Bank and Absa are also offering similar products, initially aimed to bank South Africa’s unbanked, in partnership with cellular operators.

Nedbank’s Ilze Wagener said because financial services products were harder to sell Nedbank was impressed and felt M-Pesa had done well.

But technology strategist Arthur Goldstuck said that M-Pesa was unlikely to succeed in South Africa if Vodacom failed to address several concerns.

Goldstuck said factors that made M-Pesa a success in east Africa included that there was a high unbanked population, Safaricom was the only dominant telco offering M-Pesa, the culture of remittances (sending money home) was high, a more lenient regulatory framework allowed Safaricom to obtain a banking licence and it was cheap to use at particularly low levels of money transfer.

Taylor said M-Pesa was not a cellphone banking product and did not emulate internet banking on the cellphone.

Rather, through 3 000 outlets including spaza shops and retail stores, cellphone users could register for M-Pesa using their bar-coded ID and via the virtual account make and receive payments, buy airtime, store money and send money to anyone with a cellphone. Users can withdraw money at an M-Pesa outlet or Nedbank ATM.

He said Vodacom had wanted its own banking licence but was prohibited by the strict regulatory environment.

Magda Tollet, the marketing manager for M-Pesa, said that Vodacom had employed ambassadors, dubbed Mzalas (an Nguni language word meaning relative or friend), to educate people in rural and urban areas about M-Pesa by targeting hot spots such as Home Affairs offices, stokvels, church gatherings and sports events.

In affluent areas brand ambassadors targeted clients at Vodacom stores and had also launched promotions, a competition, and new television, radio, print and online adverts.

“At the moment most of our customers are banked which tells an interesting story that we can do so much more on the unbanked,” Tollet said.

Source: Business Day

* M-Pesa: How it works

Sending money by M-Pesa is like having instant cash in your hand. Money can be loaded onto a Vodacom cellphone at any M-Pesa outlet. Outlets are retail stores, spazas, community service containers and all Nedbank branches.

At outlets, customers can register for the service and also deposit money into their M-Pesa account or withdraw it as cash. Once customers have money in their M-Pesa account, they can send it to any other cellphone in SA.

The receiver can then redeem the cash at an M-Pesa outlet or a Nedbank ATM. They may also choose to buy airtime, or transfer the money to another person. Only Vodacom customers can send M-Pesa, but anyone with a cellphone can receive it.

M-Pesa works just like cash, but it is safer and more convenient to transfer. The technology is simple to use on any cellphone and there are no monthly charges or minimum balance requirements – meaning the service will be accessible to everyone across the country. There is also no airtime charge for M-Pesa transactions.

The application is secured by the use of a secure PIN code number. Customers access their accounts using a four-digit PIN code and, as long as that PIN remains secret, only they can access the account.