Q & A With M-Pesa Founder Michael Joseph

Q & A With M-Pesa Founder Michael Joseph

With the recent launch of mobile money transfer platform M-Pesa in Romania, its founder, Michael Joseph, said Ghana is the only country in Africa where M-Pesa has not yet debuted. That could be about to change.

M-Pesa uses text messages to send and receive money through mobile phones, and it’s credited with transforming the lives of millions of low-income Africans who lack access to conventional banking services, according to RFI.

Since it debuted in Kenya seven years ago, almost 17 million users have signed up for M-Pesa. Vodafone, the company that developed the technology, hopes it will spark a
mobile money revolution in Eastern Europe and in India, Joseph said.

From RFI.

Is this a first, mobile technology from Africa being
exported to Europe?

I’m not sure. I would claim it to be the first. It’s the
first as far as I know, so I would say yes. Certainly when
you look at technology generally coming from Europe or U.S.
to Africa, probably it’s the first going from Africa to

It must make you particularly proud given that you’re an

The technology’s not such a big deal. The thing is the
actual idea of changing people’s lives through technology
that makes me very proud.

You chose Romania because not many people have bank accounts there. Which other European countries do you think you could launch in?

It will not succeed everywhere. First you need
to look at whether there is a big gap between mobile
ownership and bank account ownership. What is that gap,
what is the existence of banking infrastructure in the
country? So if you look at Romania or most of the east
European countries, I think (they) qualify as far as
that’s concerned, also where people are still very much
used to using cash as the medium, rather than credit

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Did you consider using a different name other than the
Swahili name M-Pesa (which means money)?

Yes, tempting. But originally, just as far as India’s
concerned, the word pesa actually comes from India. There
it’s called paisa. Actually in Swahili it kind of changed
from paisa to pesa. When we went into India there was a
great temptation to call it M-Paisa rather than M-Pesa.
But the reason why we stuck with M-Pesa is because at some
point in the future, the not too distant future, international remittances will become much more important and therefore if people go anywhere in the world and they see the M-Pesa logo they’ll know they can send money from that location to an M-Pesa customer in Africa, India or Europe.

I understand you have around 1.5 million users currently in India. Could you tell us more about your operations there?

We launched first in India in February last year. India is a bit more difficult than Africa in terms of regulations. The regulations there are much more entrenched and the regulator is much more cautious there and so we had some regulation hurdles to overcome. I would say it’s still in its infancy and we started it in one area at a time. So we started in Calcutta and then we moved to Mumbai and so on. So it’s still in its infancy, but I think that if you go to India you’ll see the people send money home all the time and it’s quite difficult for them using the banking system. So I think it’s going to catch on, whether it’ll catch on tomorrow or in six months time, that’s still debatable, but it’ll definitely get big there.

You’re just behind Airtel in India, one of the other providers. How significant is this competition between different mobile money providers?

It helps us, it doesn’t hinder us. I think the more
operators that use mobile money or want to introduce
mobile money, I think that’s a great help for us because
it raises the knowledge about it amongst customers. They
start to become much more aware about what mobile money
is. Then we also have a joint or a common front to talk to
the regulators to allow us to move money across the
country. Regulators worry about money laundering,
terrorist funding and all that, but we are moving very
small amounts of money. You still need to persuade the
regulators to allow us to do this and therefore I think
having competition also using mobile money helps a lot.

You’re re-launching the M-Pesa service in South Africa. It was previously suspended because of the lack of adoption. Why will it succeed this time?

This is quite a sore point for me, so I have to be careful
what I say here. I think originally when they launched
they did not take heed, or follow the mistakes and the
lessons we had already learnt in Kenya and Tanzania. So
they launched an M-Pesa product which they launched to the
entire population rather than focusing on the bottom of
the pyramid. This was the big mistake here. They said M-
Pesa is everybody.. it’s not for everybody in the
beginning. In the beginning it’s designed for people at
the bottom of the economic pyramid, people who don’t have
access to bank accounts, debit cards, Internet or things
like that. So you need to focus on that market segment and
then as that market segment adopts it, the rest of the
market slowly begins to adopt it. So, I think they just
didn’t focus it enough.

Secondly, one of the most important things about M-Pesa — believe it, there are over 250 mobile money operations around the world today, of that only 10 are really successful, recognized by the GSMA (Groupe Speciale Mobile Association) — the key success factor of M-Pesa is a massive distribution network, where the ordinary person, if he receives money or wants to send money, can just walk down the street to a mom ‘n pop
store that offers him this cash-in, cash-out facility. In
South Africa when they launched they didn’t have a big
distribution network and that was a big mistake.

You’re already in several African countries. Do you have plans to launch M-Pesa in more African countries?

We will launch M-Pesa wherever Vodafone is in Africa. So
the only country in Africa where we have not launched M-
Pesa is Ghana. That is probably coming on-stream in the
near future.

In some way you’re cutting out the banks and payment
providers. Do you think they’re concerned that they’re
being made redundant?

No, I don’t believe so. In the beginning that’s how
traditional banks reacted, saying ‘you’re taking business
away from us.’ But actually we are not. Banks really cannot
compete where we are at the bottom of the pyramid. The
average transaction value is about $10. To move $10
for a bank from one customer to another is quite
expensive. For mobile money operators it’s not so

Because also we’re basically data and voice
providers, mobile money is a value-added service for us to
get loyalty from our customers. We don’t have to make huge
amounts of money from it. So we can subsidize it or keep
it at a very low rate.

We’re not really competing with the
banks at the bottom of the pyramid. We’re not moving
thousands of dollars per customer. We have strict limits
from the regulators, how much money customers can send per
day, per week or per month. So we’re not really competing
with banks. Also banks, to a large extent, particularly in
Africa, they’ve withdrawn from the rural areas, because
it’s very expensive to have traditional banking bricks and
mortar in rural areas. So they’ve withdrawn from there, we
are filling the gap that they’ve left behind.

Where do you see payments technology going in the future?

I think as people start to get used to using the mobile
phone as their mobile wallet, I think the usage will only
grow. More and more people will use it for more and more
things. Where will it end up, I do not know. At my level,
when I’m looking at M-Pesa, where can we take M-Pesa? I
think we can take M-Pesa a long, long way. In two
countries, Tanzania and Kenya, we’ve launched savings and
loans. People can save as little as 1 cent, even 1 euro
cent into a savings account free of charge, earn interest
and then after a certain period of time they can borrow
money — a multiple of their savings. The savings and loans
(will) become very big. Micro insurance will become a very big part of it– micro health insurance and special wallets for
health insurance.

Say for instance when a woman gets
pregnant, she can start to save tiny amounts of money into
a specific wallet that she can use just for antenatal care
or when she goes to the hospital to have her baby. The sky
is the limit. So I think as people get more comfortable
using their mobile phones as a payment instrument I think
you’ll start to see less and less people carrying around
big wallets full of credit cards and debit cards.

Read more at RFI.