Nick Hughes led the team to take M-PESA from concept to scale, a mobile money project that has revolutionized the life of millions of Africans since it launched in 2007. In 2012, Nick launched a new project, M-KOPA. He is determined to continue leveraging the power of mobile connectivity for a better world, this time, in the clean energy sector. Read our exclusive interview in which he talks about his two pioneering projects and shares with us his vision of mobile money in the future.
Nick Hughes. The biggest impact is that M-PESA increases the velocity of money! The ability to transfer relatively small amounts of money quickly across long distances has huge impact, and this is magnified many times in markets with limited infrastructure. M-PESA is a great example of leapfrog innovation. 19 million people have subscribed to M-PESA in Kenya since the service was launched in 2007. Each day, on average over 70 million dollars moves in relatively small transactions across the platform. That uptake and usage is the clearest indicator of how relevant, important and beneficial this is to Kenyans. M-PESA is a great example of leapfrog innovation. In the western world, we live with over-engineered legacy systems as a result of layered incremental growth, not only financial services but also the delivery of other fundamental services such as power and clean water. If we had a blank sheet of paper to start again, we would design things very differently – and that is exactly what we did with M-PESA.
Leaders League. From M-PESA to your current project M-KOPA, what has changed, and what remains the same?
N. H. It is all about staying focused on customers’ needs and using smart technology to address those requirements. In the history of M-PESA there is a wonderful lesson in observing customers’ actual behavior and not being afraid to change direction. At the outset of the M-PESA journey in 2003, while working on how to repay microfinance loans, we observed a much bigger opportunity, which was, very simply, transferring money ‘person-to-person’ using nothing more than a $10 phone. We then pivoted the business model, simplified the technology, worked with the regulators to define the rules of operation and launched M-PESA. The customer uptake was phenomenal. Eight years after its launch, M-PESA has transformed the way money moves around in Kenya and the model is being replicated in many other countries. It has also evolved into an m-commerce platform to do many things like salary payment, hospital bills reimbursement and international remittances.
A few years ago, I co-founded M-KOPA based on the belief that mobile money enables new business models to deliver relevant products and services. Today, M-KOPA provides clean affordable energy to 175,000 people living off the electricity grid, and we’re growing fast across East Africa, reaching more than 12,000 new customers each month.
Again, we have built M-KOPA based on customer needs and we use smart technology to solve problems. In Africa, over 700 million people lack access to reliable power and have no alternatives but to spend precious household income on small amounts of poor quality fuel depending on their limited available cash. Mobile money allows us to offer a new delivery model. We produce good quality solar energy systems that are connected to the mobile network using embedded GSM technology and that we can monitor remotely. We then allow customers to buy units of credit for a specific solar device by making small payments to us (“top-up”). Upon receipt of payment we remotely turn on that device to work however many days for the customer. The customer can chose to pay fast or slow, 24/7 according to his or her disposable income. Once paid off, the customer benefits from free energy. We estimate that each customer can save up to $750 in energy costs over the life of the product. In other words, we micro-asset finance the clean energy equipment and the customer can slowly purchase it from us without worrying about the warranty. Actually, we position ourselves as a service provider (producing energy) rather than a sales company of solar equipment. There is huge demand for such services enabled by mobile connectivity and mobile payments.
Leaders League. What is your perspective of mobile payment in the next 3 to 5 years?
N. H. It is fascinating that in emerging economies, driven by the huge need of individuals and businesses to transfer money and the lack of alternative methods, the use of mobile money is developing at scale and starting to enable new business models like M-KOPA. We need to keep in mind that it is a heavily regulated space, and for good reason, namely to protect consumers. However, regulators are starting to recognize that to address financial inclusion, appropriate legal frameworks need to be to put in place to allow new ways of transacting, which in turn will bring new players into the market. In India, recent proposals under the Modi government for Payment Banks are very positive and could change the landscape.
Longer-term opportunities are even more exciting. Throughout history, money has simply been a token of trust, just a form of “I-owe-you” between two parties. As long as that trust is inherently part of the transaction, the medium of transaction doesn’t matter: it could be (in fact it has been!) a conch shell, a stone wheel, a coin or an M-PESA payment. We are increasingly near the point where any individual or organization can be digitally identified, and that digital identity alone can provide a secure basis for transactions without traditional currencies or even electronic fund transfers. Will that ever replace the need for cash? Maybe, but one thing is for sure: new business models that can radically change the way we deliver many products and services are just emerging.
• 19 million people have subscribed to M-PESA in Kenya since the service was launched in 2007. Each day, on average over 70 million dollars moves in relatively small transactions across the platform.
• M-KOPA provides clean, affordable energy to 175,000 people living off the electricity grid, and we’re growing fast across East Africa, reaching more than 12,000 new customers each month
• With M-KOPA, we estimate that each customer can save $750 in energy costs over the life of the product.
Read more business insight in our next International Report of Innovation and Technology. Publication in April 2015.
Jeanne Yizhen YIN