[Susie Lonie] Ever since the launch of M-PESA in Kenya in 2007 the payments world has looked upon mobile money (MM), the precocious newcomer to financial services in anticipation.  There are in excess of 160 live MM services being operated around the world right now, but despite high expectations created by success in Kenya, only a handful have thus far reached critical mass.  (It is generally accepted that a MM service is successful, i.e. can break even and move into profit, when it has about one million active subscribers who are each performing at least one transaction per month.) To have less than 10% of these services successful by this standard six years later is pretty dismal and is the mobile money paradox: consumers want to buy it and businesses want to sell it; yet the industry is neither flourishing nor profitable.

So what is going wrong?

The runaway success of M-PESA in Kenya led many companies to believe that MM is an easy win at relatively low cost and with little effort.  Dazzled by huge customer numbers (for several years M-PESA recruited over 50,000 customers every week) and millions of transactions every day, most have failed to understand that M-PESA’s success in Kenya was neither cheap, nor easy.

The greatest cause of poor performance stems from the culture of the companies offering MM. Grounded in the assumption that it is closely aligned with their core business, telcos treat MM as a value-added service (VAS) akin to launching a mobile internet portal, blithely expecting it to fit within their normal operations.  Meanwhile, banks assume that it is just another kind of mobile banking service, closely aligned to their core business, and able to fit easily into their existing infrastructure.  Whilst MM shares many characteristics with both telecoms and banking, these assumptions are profoundly incorrect.  Companies that have succeeded, whether telcos or banks, have recognised that operating an MM service requires a dedicated team of specialists and operational procedures which depart significantly from their normal practices.  They have also recognised the need to invest significant sums of money into both internal operations and to marketing a new service to traditionally hard-to-reach consumers.

Launching MM is an expensive business.  Creating an agent (branch) network, training it, and maintaining the agents’ engagement in the early days when they have few customers, and therefore little revenue, is not a task for the fainthearted.  Each agent must be persuaded to invest their cash in an e-money float account; cash which could otherwise be used to buy traditional stock for their outlet.  Agents must be incentivised to provide a return on this investment which is sufficiently attractive for them to divert resource from their core business until the service reaches critical mass and becomes a significant income stream.  

Meanwhile, most target customers are utterly unfamiliar with the concept of MM and significant marketing effort is required to educate them on what the service does, how they use it, and why they should trust it.  This requires a hands-on “below the line” approach to marketing which is a far cry from the bank/telco preferred approach of offering high value customers the latest technology via large-scale multimedia advertising campaigns.

Another factor inhibiting success is a regulatory environment which is usually unclear and can be highly restrictive.  Most regulators are just starting to learn about MM, the opportunities to improve governance offered by the technology, and where the risks lie.  Meanwhile, the banking culture tends to be cautious and risk averse.  If in doubt they will err on the side of over-interpreting regulation and imposing restrictive practices unsuited to the low risk associated with low value transactions.  Further, banks nurture their relationship with the regulator very carefully and are disinclined to challenge inappropriate regulation for the new and unproven MM service and in doing so, potentially put their core banking relationship at risk.  Telecoms companies, on the other hand, generally do not have a relationship with the financial regulator and many do not understand the complexities of adhering to their requirements.  By nature telcos are entrepreneurial and willing to make mistakes and they have more appetite to push back to the regulator, if they have the internal expertise to fully understand their options.  Sadly, many do not have this resource and just accept a poor interpretation of the law as the way they must operate. This then becomes their excuse for lacklustre performance.  When regulation requires banks and telcos into formal partnerships, the cultural dissonance can lead to misunderstanding, delays, and excessive regulatory controls as the two compliance teams try to out-do each other as worthy upholders of the law.  

The MM industry is still underdeveloped and largely unproven. The opportunity it provides to serve the large segment of un- or under-represented “poor” is clear and the success in East Africa demonstrates just how transformational it can be.  However, many organisational and regulatory challenges need to be overcome for it to reach its full potential.  If these are not grasped and resolved, mobile money stands in danger of being written off as a niche product with specific application in just a few markets which “just happen to have the right conditions”.


Susie Lonie is an associate with Consult Hyperion. If you are interested in becoming an associate too, contact lindi.friel@chyp.com


  1. Amazing summary on Mobile Money, I have only one more point to add. Success of Mobile Money also requires an eco system which can make the service useful, e.g. low penetration of banking services, cost of retail bank account, and the cost of cash management for individuals.

  2. All very good points, Susie, but I suggest another reason for slow adoption in markets where paying with plastic is widespread: mobile money does not offer a significant incremental benefit to consumers or merchants.

    The concept is great. And one day, when we’re doing all sort of other things on mobile devices, payments will fall naturally into the pattern. But at physical point of sale today, nothing is broken– when did you last hear someone complain about dipping a card?

    In certain cases, such as transit, there is a real benefit. Just as there was in East Africa. But in UK, France, US… results demonstrate the neither consumers or merchants really care enough to change behavior if the switch is just plastic card for phone.

  3. To summarize in one line, I’d say that M-Pesa is successful in Kenya, because people trust their mobile service providers more than they trust banks.

  4. M-PESA’s success has absolutely nothing to do with trust or lack of it. It had more to do with choice or lack of it. According to many reports, banks didn’t find any business case in providing banking services in rural Kenya. The unbanked had no choice but to go to M-PESA, which was allowed to start its service only because banks weren’t interested in this market.

  5. Judging by the comments, clearly the success is because of regional factors. In the USA, companies like Boost Mobile http://www.prepaidsmartphones.com/boost-mobile.php are doing what they can. Anything online that involves a new way of thinking is going to take time. MM is no different. Very few people are early adopters. As mentioned already, regulators are generally painfully slow and behind the time. Regulations are always going to be slowing in countries like Canada, USA, UK, etc.

  6. Susie, The wealth of your knowledge on MM is unparalleled, and it shows once again. Internal selling to MNO management is far tougher than any challenge such as channel management etc.

  7. The paradox of the success story of mobile money in Kenya is under pinned by many factors major one being the need of financial deepening and inclusion in the country. There was a large number of un-banked or underbanked population who needed financial service, banks were not willing to invest in brick and motar to set up outlets where it was not economically viable to do so. Secondly, the effort and money invested by the telcos to set up the service and the large distribution network of agents made it acceptable. It created unimaginable convenience and ease in money transfer. Lastly the culture and attitude of the people also had a significant impact on the MM success. The people in Kenya will mostly take up anything that will make their lives easier and profitable, this was just a perfect one, they easily try out new ideas. Of course there other factors that contributed to this success but cannot all be included in this discussion.

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