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Vodacom rebuilds m-pesa for SA

Following a disastrous South African launch in 2010, Vodacom has redesigned and re launched m-pesa, the mobile money service that has transformed the Kenyan economy. ARTHUR GOLDSTUCK considers its chances of success.

When m-pesa was first launched in South Africa, it was almost a carbon-copy of the mobile money transfer service that had already gained 13-million customers in Kenya in the previous three years. It was launched with expectations of similar take-up. However, it failed to take into account both the very different nature of financial services in South Africa. Moreover, it failed to put in place the kind of widespread and informal infrastructure it had in Kenya, instead relying on a single bank, Nedbank, that had little penetration among lower-income groups or in rural areas.

The consequence was that, in the first year, it gained fewer than 100 000 users. The service was overhauled, and slowly crept up to the million mark.

Vodacom was rather euphemistic about its failure in a statement this week: “Vodacom introduced m-pesa to South Africa in 2010 and while the initial take up was strong with more than one million people signing up, it hasn’t so far enjoyed the overwhelming uptake seen in markets like Kenya and Tanzania.

Intent on being third time lucky, however, Vodacom appointed Standard Bank m-commerce wizard Herman Singh to head up a revamped m-pesa operation.

“Over the past two years Vodacom has assembled a new m-pesa team, bringing in external expertise in banking and mobile payments, and also studied the factors which have held the service back in South Africa and those that made it a success elsewhere,” read the statement. “The culmination of this work is the launch of a totally revamped service which addresses four key areas: distribution, registration, functionality, and loyalty.

Vodacom Group CEO Shameel Joosub elaborated: “When we first launched m-pesa in 2010 we had high hopes that it would have the same kind of transformational impact seen in Kenya. We wanted to change the way South Africans handle money for the better. Each country has its own unique needs and challenges, and it has been a learning process getting to understand exactly what will and what won’t work in South Africa. We’ve taken the experience and knowledge gained from the past four years and have used this as the basis for a comprehensive redesign of m-pesa for the South African market.

The bottom line is, Vodacom finally listened to criticism. Mindful of the fact that 70% of the adult population in Kenya uses m-pesa, the company realised that distribution was key. In Kenya, m-pesa has more than 60 000 agents.

“It’s not good enough to have an agent at the nearest big town or at a handful of big retail outlets,” says Joosub. “Kenya and Tanzania taught us that if you need to take a taxi to use the service, it will fail. Instead, you need to have agents where people live and work.

The learning has been dramatic: The 2014 version of m-pesa in South Africa is launching with more than 8 000 agents at informal outlets as well as retail stores, with an aim of 30 000 points of presence by year-end.

“This will guarantee a lead in distribution by putting the nearest m-pesa agent within hundreds of meters of customers, and has the potential to generate additional employment,” Vodacom announced, saying it has even gone as far as launching a mobile-based locator to direct customers to the nearest m-pesa outlet.

Ease of registration was the second priority, according to the statement:

“In Kenya and Tanzania, any m-pesa agent can register a customer – all it takes is a mobile phone and an ID document. For the original launch of m-pesa in South Africa, a potential customer had to present their ID in person at a limited number of outlets. With the revised m-pesa, customers can self-register via mobile phone simply by entering their name and ID number. If a customer would like to enhance the functionality and transaction limits of their m-pesa account, then all they need to do is take their ID and register in person at one of the roughly 1,000 FICA sites set up countrywide. These include Vodacom shops, spaza shops and specialized FICA hubs at key points like cash ‘n carry outlets.

Joosub added: “While distribution and registration are key enabling factors, the heart of the revised m-pesa is the functionality. We’re excited to be working with two key new partners, Bidvest Bank and Visa, whose skills and expertise have allowed us to add entirely new functionality to m-pesa that addresses the specific needs of the South African market.

The revised service includes the following new features:

* A chip and pin protected Visa card:

* A voucher system to upload cash and convert cash to m-pesa at all Vodacom shops, selected spaza shops and retailers, in a process is similar to buying airtime:

* Access to approximately 27 000 ATMs and over 240 000 merchant outlets in South Africa:

Person to person transfers, which will be given additional functionality in the near future. I

* Usage linked to rewards in the form of airtime and other offers, starting with a doubling of airtime when purchasing airtime via m-pesa, and free airtime for activating the m-pesa Visa card.

“m-pesa has the potential to transform how South Africans manage money,” said Joosub. “We’ve worked hard to learn from our experience with the service so far, and have come back with something that we think is truly compelling. We’re looking forward to the day that South Africa is held up as yet another example of where m-pesa has changed the face of banking, unlocking the power of mobile technology to make people’s lives easier.

World Wide Worx was a vehement critic of m-pesa at the time it first launched in South Africa, pointing out 13 factors in its Kenya success that were not present in South Africa.

Many of these have now been addressed, although some remain specific to the East African market, such as the Swahili brand name. The word “pesa” means “money” in Swahili, making the name instantly self-explanatory in Kenya and Tanzania, where it has seen most success. That may remain a stumbling block in South Africa but, this time round, the product no longer feels like a transplant that the recipient body will automatically reject.

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