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M-Pesa expands services and could appeal more to cashless societies

In partnership with Eat Out Kenya, an online restaurants guide and booking website, Safaricom has ventured into the restaurant business by launching an M-Pesa payments platform for restaurant bills. With the service costing 1.5% of the value of the transaction, it is priced at about half of what users of credit cards pay for services.

Safaricom’s M-Pesa service is already the dominant money transfer platform in Kenya, accounting for around 30% of GDP payments. The service is also used by firms for payment of utility bills. “We are already at petrol stations, and in addition we have about 4,000 pay-bill merchants and 1,600 firms that use M-Pesa for utility payments,” said Bob Collymore, Safaricom CEO during the launch of the service on Tuesday, 16 April.

The mobile operator has also partnered with Kopo Kopo, which offers a platform for SMEs to accept payments via M-Pesa. Of Kopo Kopo’s 3,000 outlets, some are restaurants. “We have a network of 300 restaurants over two years, while Kopo Kopo’s outlets including restaurants that utilise it to take payments. We piloted the system with bars, and now are stepping up to middle and high end restaurants,” said the Eat Out Kenya director, Mikul Shah, speaking on the synergies.

Collymore said the platform would give restaurants an opportunity to offer a convenient and secure service to clients, also speaking in reference to the increase in ATM related fraud which had seen banks migrate towards chip-based cards.

He assured the partners in the venture over the safety of the M-Pesa money transfer system and added that Safaricom had experience in handling such payments. The banks, on the other hand, have pledged to spend KES 2.5 billion (USD 30 million) over the next six months to replace the magnetic strips cards which are more prone to fraud.

According to the Central Bank of Kenya, the number of credit and debit cards retail transactions as at December 2012 stood at 138,011 and 9.1 million, up from 122,212 and 8.5 million, respectively, during the same period in 2011.

Safaricom says it processes two KES 2 billion transactions in a day on its M-Pesa platform in the form of two million cash transfer transactions and four million airtime top up transactions from its estimated 16 million M-Pesa customers.

We certainly expect this development to result in higher transactions and therefore higher M-Pesa ARPUs for Safaricom and we also expect similar services across the continent to mimic it.

M-Pesa has been highly successful in East Africa as it benefited from the region’s low bank penetration. This has not been the case in other markets such as South Africa where bank penetration was already relatively high. However, we believe that M-Pesa is a cheaper alternative to debit and credit cards, and especially in a society becoming increasingly cashless, we could see the platform gain traction in South Africa.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.

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