Financial Sector Development in Africa: Opportunities ... - World Bank

Mobile Financial Services in Africa: The Next Generation 49
underserved by traditional financial service providers. In addition, the
nation’s large overseas workforce already remitted large earnings flows
to family back home. Early financial services launched by local MNOs
Smart (2004) and Globe (2005) focused on this opportunity. The
subsequent launch of M-PESA by Safaricom in Kenya (2007) also built
on the need for safe, convenient, and affordable money transfers from
cities to rural areas: it was marketed as a way to “send money home,” in
the words of the award-winning slogan from one of M-PESA’s first
commercials.
These second-generation solutions, born in the context of developing
countries, faced a different type of challenge than the first generation:
because they could not rely on an already existing payment infrastructure,
they had to build their own distributional ecosystems to accept
cash in and pay cash out (CICO). Today, Safaricom’s large, sustainable
agent network is recognized as the heart of its much-hailed success with
M-PESA. For example, M-PESA now has more than 19,000 CICO
agents who are spread throughout the country. This extensive network
of connections helps customers develop familiarity and trust in the
other wise mysterious process of buying and selling electronic money.
Furthermore, MNOs were more likely than banks to have the competence
to build and manage widespread agent networks. Apart from the
usual systems challenges of adding a new channel to back-office systems,
many regulatory restrictions limited banks’ ability to allow agents to
accept deposits on their behalf. These restrictions are now easing, as
more countries see the benefits of allowing banks to have a lower-cost
form of distribution.
Table 2.2 summarizes the salient features of these three distinct
second-generation mobile financial service models: FNB’s bank-led
approach for underbanked customers; Safaricom’s M-PESA mass market
mobile money transfer service; and Celpay’s payment service (which
focused on larger businesses that distribute goods and collect payments).
It is worth noting that Celpay also distributes government benefits
(government-to-person or G2P benefits) to demobilized soldiers in the
Democratic Republic of Congo under a World Bank donor-financed
scheme called Disarm, Demobilize and Reintegrate (DDR). This started
as a mobile payment service through which the soldiers received their
cash from agents’ mobile phones, but the lack of liquidity among agents
in rural areas caused the DDR scheme to become a more conventional
cash-payout scheme involving mobile vehicles that served as distribution
centers.