In some emerging economies, mobile money has proved a goldmine for operators, and services continue to expand. Once, these were mainly focused on simple SMS-based payments systems for customers with featurephones and no bank accounts. While services for the ‘unbanked’ remain important, major offerings such as Vodafone’s m-Pesa have grown to offer a full portfolio of offerings including savings and credit.
In Ethiopia, where Ethio Telecom will soon face competition for the first time as the government awards new licences, the incumbent is launching its first mobile money services, presumably to help strengthen itself against the future new entrants. Its service, TeleBirr, will allow customers to send and receive money, including from abroad, to deposit or withdraw cash from appointed agents, and to pay bills.
TeleBirr will be available in five languages and is targeting about 21m users in its first year, rising to 33m in five years, according to Ethio Telecom’s CEO Frehiwot Tamiru. She has set the ambitious target that between 40% and 50% of the country’s economic output will be carried via the platform by 2026. This is not unrealistic – in Kenya, m-Pesa processes transactions equivalent to about half of the country’s GDP each year.
Although a previous attempt to launch mobile money services in Ethiopia failed about 10 years ago, the examples of success in many African markets more recently give confidence that TeleBirr will fare better. As part of the plan to deregulate the telecoms market, the government has reserved some activities for Ethio Telecom alone, to encourage it to innovate while giving it a cushion to adjust to competition.
Foreign operators are barred from launching their own mobile money services, at least for a year or two, although this rule has been blamed for the lukewarm response to the award of new licences. Only two operators – South Africa’s MTN, and a consortium led by Vodafone – have applied for the two licences on offer. Once the restriction on mobile money services was announced, bids fell by $500m and some companies, reportedly including Orange, dropped out. Orange has made its bank a key element of its growth strategy, operating it in African and European markets. The potential to launch mobile money services in an untapped market was seen as a major incentive to invest in Ethiopia.
In Kenya, one of the most successful and established markets for mobile money services, Safaricom (majority owned by Vodafone’s South African subsidiary Vodacom) operates the m-Pesa service. Now, the operator has announced that it has been in talks with Amazon with a view to the e-commerce giant accepting m-Pesa payments.
Safaricom CEO Peter Ndegwa said partnerships with companies like Amazon were increasingly important to the telco business model to support digital services and cloud services. A deal for m-Pesa would increase the share of transactions in Kenya that Safaricom processes still further as well as opening Amazon’s platform up to unbanked users. Currently, m-Pesa makes up 33% of the operator’s revenue and it already has partnerships in place with Visa, Alibaba, PayPal and Western Union.
In April 2020, Vodacom and Safaricom acquired control of m-Pesa from Vodafone.