New data shows M-PESA's reach is spreading down market while service and customer satisfaction are at all time highs.
Can you believe that over half of the poor and unbanked population of an African country are doing financial transactions on their cell phones? And can you believe that even in rural areas most of them have merchants and shop owners competing to deliver the highest level of service so they can conveniently deposit and withdraw cash to fund these transactions?
This is the reality in Kenya where M-PESA, a mobile-phone based electronic payment and store of value system, has in just three years reached 57% of the Kenyan adult population. Between them, M-PESA customers do more money transfers domestically than Western Union does globally, but making payments and storing value electronically are not that new; banks have been offering these services in Kenya for decades. M-PESA's real innovation is that customers can deposit and withdraw cash at any of 20,000 stores - that's 20 times the number of bank branches in the country!
M-PESA's phenomenal growth has made it the darling of many in the financial inclusion field, but many have raised questions as to whether it would be possible to maintain the integrity of the system and protect consumers' access to their money as it grows. One could imagine scenarios where M-PESA's service levels dropped as the system propagates. However, a close analysis of the M-PESA system might also lead to a different conclusion. M-PESA agents in Kenya are ubiquitous and compete for customers, like any other retail outlet; it's unlikely any could survive with a reputation for poor service or for defrauding their customers. While this holds true intuitively, without hard data anecdotes of fraud and customers being unable to access their money abound.
Well, new data has just come in, and as it turns out, the news is even better than we might have hoped. Two researchers (Billy Jack of Georgetown and Tavneet Suri of MIT, with funding provided by the Consortium on Financial Systems and Poverty, a grantee of the Bill and Melinda Gates Foundation) have new results from a survey of 2,016 Kenyan households who were queried once in August of 2008 and again in December 2009. Even while the share of Kenyan households using M-PESA has grown from 44% in 2008 to 70% in 2009 (and since this second survey round, the number of new M-PESA customers has grown a further 40% more to 12.6m), retail agents have become more trusted, more reliable, and even greater numbers of clients than before proclaim their high level of satisfaction with the service. Between the two survey rounds, those who "trust agents" went from 65% to 95% of respondents; customers reporting delays in withdrawing money fell from 22% to 16% while the share of delays due to agents running out of liquidity fell from 70% to 30% of total delays (the most common cause of delay now is just that the cell service is down).
These results are largely driven by the competition between agents, which compels them to maintain excellent levels of customer service. When asked about the hypothetical impact of M-PESA closing down, 92% of respondents said that it would have a large and negative on their lives (up from 85%). Clearly, customers have no doubts about the service. Their only worry is that it might go away at some point!
What's potentially even more exciting than the customer satisfaction numbers is the fact that M-PESA has spread to growing numbers of vulnerable populations, giving them an extremely valuable tool to manage their finances. The share of poor households, rural households, and unbanked households who use M-PESA are now all greater than 50%, and over 80% of all users use the service to save as well as to make money transfers. Additionally, the researchers have shared with me preliminary findings indicating that households who use M-PESA and are nearby an agent point are better able to maintain the level of consumption expenditures, in particular food consumption, in the face of negative income shocks such as job loss, livestock death, harvest or business failure, poor health, etc.
These results are truly excellent news on every count. In just a few short years, M-PESA has reached over half the unbanked Kenyan population with a viable savings option and provided the poor a useful tool to manage their money. This is a major advance in the cause of bringing better financial services to the poor and reconfirms the Bill & Melinda Gates Foundation's belief that mobile money products have the potential to transform the landscape of financial options available to the poor.