M-Pesa profile in Safaricom rises as voice revenue stutters

Safaricom customers transacted Sh29.5 trillion via M-Pesa in the year to March 2022, showing how essential the mobile money platform has become to the global economy. Kenya.

The value of M-Pesa transactions increased by 34% from 22 trillion shillings in 2021 and more than doubled from 13.940 billion shillings traded in 2020.

Transaction volume also increased by 34.9% to 15.8 billion from 11.67 billion in 2020. Volumes increased from 8.99 billion in 2020.

Among the factors that have driven the growth in the use of M-Pesa is the growth in demand for services such as the Fuliza overdraft facility.

The growth of the last two years has also been partly helped by the measures put in place by the government in 2020 to protect Kenyans from the adverse effects of Covid-19. These included a zero rate fee on transactions below 1,000 shillings.

Safaricom had said it was unsure whether customers who transacted on M-Pesa due to the waiver of fees on transactions below 1,000 shillings would stay after the fee was reinstated.

It turns out that new customers who joined during Covid-19 found value in the service and the telecom operator did not see a drop in the average number of monthly M-Pesa users even after having reinstated fees on low value transactions.

M-Pesa’s growth is also reflected in Safaricom’s revenue, as the service spins off revenue streams such as voice, data and text messaging to become the telecoms operator’s cash cow. M-Pesa has transitioned to a universal payment ecosystem and is our main revenue contributor. Fintech solutions, including payments, loans and savings and international money transfers (IMT), continue to drive ecosystem rigidity,” said Safaricom CFO Dilip Pal.

“We have created a company that enables millions of businesses and individuals to connect and grow while contributing meaningfully to economic development. M-Pesa is the key payments ecosystem player driving the financial inclusion matrix for the country.

M-Pesa accounted for 38.3% of Safaricom’s service revenue. The company’s revenue amounted to 281.1 billion shillings, with M-Pesa bringing in 107.69 billion shillings. Mobile money service revenues could have been higher if some services, such as transferring funds to banks, were still not free.

Voice and messaging – which for years was the mainstay of the business – recorded revenue of 83.21 billion shillings, accounting for 33.5% of revenue.

In the period to March 2022, courier revenue fell by 20% to 10.88 billion shillings. Voice revenues are under threat as people shift to internet calls. Safaricom chief executive Peter Ndegwa said last November that voice is a mature segment and little growth is expected in the future.

“We are not saying that we believe there will be significant growth in the future. What we do know is that given our scale, we need to defend the current segment and ensure that we maintain the commitment from our customers,” he said.

The company echoed those sentiments in the recent annual results release. Safaricom said the decline is expected as customers switch to other messaging platforms such as WhatsApp.

This, Safaricom said, was “in line with global industry trends as customers migrate to new technologies.”

Mobile data revenue increased by 8.1% to 48.44 billion shillings. The company noted that revenue could have been higher, but growth was “weighed down by excise duty adjustments absorbed from August 2021, which slowed industry momentum and growth. price rationalization.

Safaricom’s strategy is to extend its tentacles into multiple areas in addition to telecommunications and finance.

The company has already tapped into healthcare, education, e-commerce and agriculture. But in all of this, it has always found a way to integrate with M-Pesa.

Safaricom is also awaiting regulatory approval from the Central Bank of Kenya (CBK) to launch its investment platform, Mali, which will allow subscribers to invest in mutual funds with as little as 100 shillings with interest of up to at 10% per year.

The combination of Mali, Fuliza and the revamped business app M-Pesa means that individual users and those managing SME accounts on Safaricom will have little incentive to leave the telecom operator’s digital finance ecosystem.

The deep foray into financial services, where the company already controls substantial aspects, could reignite the debate over whether the company is too big to the detriment of other industry players, consumers and even new entrants into the sector.

But the telco already sees a new opportunity if M-Pesa is spun off from Safaricom.

Safaricom wants M-Pesa to start issuing high-value loans such as car loans if the proposal to separate the mobile money platform from the telecommunications sector is approved.

Michael Joseph, the chairman of Safaricom, said the separation will see Safaricom remain under the Communications Authority of Kenya (CA) while M-Pesa will be regulated by the Central Bank of Kenya (CBK), allowing it to deepen its financial services.

“What could happen is maybe if we take M-Pesa out of Safaricom and it was regulated by the CBK, then we could ask the CBK to offer more services that are not necessarily related to telecommunications,” Mr. Joseph said.

“It could be financial services. We could lend you money to buy a car. We cannot do it today. It is therefore possible to offer a greater range of services to choose from.

The move promises to see Safaricom, which rolled out M-Pesa in March 2007, bring financial services competition closer to the doors of banks that had initially resisted launching the revolutionary idea.