What Vodacom has learned from M-PESA’s initial failure in South Africa

Monday, August 4, 2014

Following a disastrous South African launch in 2010, Vodacom has redesigned and re launched m-pesa, the mobile money service that has transformed the Kenyan economy. ARTHUR GOLDSTUCK considers its chances of success.

When m-pesa was first launched in South Africa, it was almost a carbon-copy of the mobile money transfer service that had already gained 13-million customers in Kenya in the previous three years. It was launched with expectations of similar take-up. However, it failed to take into account both the very different nature of financial services in South Africa. Moreover, it failed to put in place the kind of widespread and informal infrastructure it had in Kenya, instead relying on a single bank, Nedbank, that had little penetration among lower-income groups or in rural areas.

The consequence was that, in the first year, it gained fewer than 100 000 users. The service was overhauled, and slowly crept up to the million mark.

Vodacom was rather euphemistic about its failure in a statement this week: “Vodacom introduced m-pesa to South Africa in 2010 and while the initial take up was strong with more than one million people signing up, it hasn’t so far enjoyed the overwhelming uptake seen in markets like Kenya and Tanzania.”

Intent on being third time lucky, however, Vodacom appointed Standard Bank m-commerce wizard Herman Singh to head up a revamped m-pesa operation.

“Over the past two years Vodacom has assembled a new m-pesa team, bringing in external expertise in banking and mobile payments, and also studied the factors which have held the service back in South Africa and those that made it a success elsewhere,” read the statement. “The culmination of this work is the launch of a totally revamped service which addresses four key areas: distribution, registration, functionality, and loyalty.”

Vodacom Group CEO Shameel Joosub elaborated: “When we first launched m-pesa in 2010 we had high hopes that it would have the same kind of transformational impact seen in Kenya. We wanted to change the way South Africans handle money for the better. Each country has its own unique needs and challenges, and it has been a learning process getting to understand exactly what will and what won’t work in South Africa. We’ve taken the experience and knowledge gained from the past four years and have used this as the basis for a comprehensive redesign of m-pesa for the South African market.”

Source: Gadget (link opens in a new window)

Telecommunications, Uncategorized
Base of the Pyramid, business development, failure, financial inclusion