Nick Hughes, the head of Vodafone's international mobile payment solutions, recently gave a talk at CGAP about the company's work in Kenya, Afghanistan, and Tanzania. If I might sum up the talk in just a few words: KISS (Keep It Simple, Stupid). Less than two years ago, Vodafone rolled out M-PESA, a mobile payments service in Kenya. M-Pesa now has some 4 million subscribers and 3,500 frontline agents. Nick made it pretty clear that this rapid uptake far exceeded any expectations that Vodafone had when they started offering this service.
The key to Vodafone's success? They focused entirely on offering a single service, and doing it well. M-PESA does not offer any banking services - no credit, no microloans, no savings. Rather, they simply offer a way to transfer money between two people. M-PESA didn't even originally plan to create payments for things like utilities or school fees - they discussed the possibility and decided to leave that to a later date. M-PESA makes its money by charging commissions on money transfers rather than on investing money.
This 'KISS' approach had two major benefits. First, M-PESA was not classified as a bank, which meant it avoided all the regulations that go along with that. Instead, it worked with Kenya's Central Bank to create a framework specifically for this type of service. Second, customers find the service extremely easy to understand and use, and this breeds trust. Transactions take a maximum of 30 seconds to complete.
Now that the service is in place and has proved its worth, it might be time to consider introducing banking services - microcredit, savings, microinsurance, etc. To do that, M-PESA would need a banking partner with the licensing to do that (which means getting permission from Kenya's Central Bank). My advice? Keep it, eh hem, simple.
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