Susie Lonie (M-PESA): “I knew it was going to be big” (Part I)
Posted on Mar 23, 2015
M-PESA is the Project (with a capital P) when we talk about mobile money, technology leapfrogging, innovation, or financial inclusion. Launched in Kenya in 2007, this project has revolutionized the life of millions of Africans. Susie Lonie, co-founder of the project, narrates the history behind the scenes.
In the second part of the interview, Susie shares with us the reaction of banks, the current status of mobile payment service development, as well as her perspective for the future. You can find it here.
Leaders League. How did M-PESA come to life?
Susie Lonie. M-PESA was born thanks to a Challenge Fund set up by the department of international development of the UK government, which supported any industry that could find a way to deepen financial inclusion in certain African countries. The co-founder of M-PESA, Nick Hughes, was head of Vodafone Group’s corporate social responsibility at that time. After doing much research to prove that mobile phones would benefit the emerging markets, he wanted to do something more constructive to move things forward. I was head of m-commerce for Vodafone UK group at that time, he came along to discuss some ideas with me, and we decided to apply to the Challenge Fund.
After several months’ technical development with a small team of about 6 external consultants, our pilot started in October 2005 with 500 customers and around 15 agents. The idea was to use mobile phones to do micro-finance loan repayment. The pilot ended in May 2006, and by that time our customers began to do business together and sent money to each other through our service.
We convinced Safaricom to launch M-PESA as a financial service product rather than a simple loan repayment product, and we launched in March 2007. The team that we put together in Kenya was absolutely outstanding with excellent people who worked incredibly long hours and they commercialized the product extremely well.
Leaders League. Did you already anticipate the long-term impact of this project early in 2007?
S. L. It’s a rather vague feeling, like making a dream into reality – I knew that if we did it right, it was going to be big, but I didn’t know how big. I couldn’t guess numbers, but certainly had a vision in my head.
It sounds terribly unrealistic, but we knew we were doing something that was special, something that was going to help people and make a massive difference to the country. I had a tiny team of 11 at the time we launched, and some people from Safaricom came to me asking: “Can I get a job at M-PESA?” I said: “We are looking for people, but it wouldn’t be a promotion. You probably need to work 2 or 3 extra hours per day, and you won’t get extra pay.” Then they responded: “Great! When can we start?” So they really understood the significance of what they were doing.
Leaders League. Is M-PESA a Kenyan product or a product developed by the Vodafone global network?
S. L. (Laughs) There are about 10 different versions about M-PESA around the world, and 280 different versions by different companies, so you need to be careful with what you hear. Actually, the pilot and all the technical development were done in the UK by Vodafone and its consultants. It was after the launch of the service that the Kenyans got incredibly involved. They did a marvelous job of commercializing the service and setting up the market. So technically it’s a UK product, and commercially it’s a Kenyan one.
It was an excellent collaboration, because we did what we were best at: the UK team had a really clever set of techies, and Kenya had really great and enthusiastic people who were committed to making sure that techies were building the right thing and working on the problems that we had in early days.
Leaders League. What was the attitude of Vodafone’s direction towards your project?
S. L. Until it was successful, Vodafone didn’t really want to know. (Laughs) It was funded entirely by the Challenge Fund until the launch. The only Vodafone employees working on the service right up about two months before the launch were Nick Hughes and I, and then one or two more team members until the launch. That is why the project is called M-PESA instead of Vodafone M-PESA, because the group didn’t want its name associated with it. It was only a small CSR project that the directors were not interested in, because it didn’t really fit into anything the UK or Vodafone Group was doing. After all, Vodafone is a telecoms company and not a financial service company, and it has so many new developments and a limited technical staff, so there was no way that an untried concept for a mobile payment service in an emerging market could get any technical resource from the group at that time.
That said, as soon as it started to look successful, Vodafone realized the importance of the project and it took a keen interest in it. Actually, the reason that so many telecoms companies are interested in mobile money services is “churn reduction”, or customer retention. Telcos’ main concern is to retain customer for mobile services, and the rationale is that customers switch networks less frequently if their bank account is associated with their SIM card. So Vodafone first saw a massive opportunity to help their emerging markets to retain the customers and maybe recruit new ones.
Leaders League. Was it difficult to finance the project?
S. L. Oh Gosh, it is always difficult to finance this project, even now. It is an expensive business to run a mobile money service. Back then, we had to build the tech from scratch because it is new and there was nothing we can go out to buy to modify. Building a well-trained agent network and educating customers also costs a lot.
Most mobile payment services need at least 2 years to prove their success, and typically they take up to 5 years. You are setting up a wholly new financial infrastructure from scratch. It’s quite a long time until you see enough return on your investment to get pay back. You do get there but it’s a new market and it takes a little time. It’s always difficult to find enough funding for mobile money services in the early days. Always.
Leaders League. What are the other challenges or difficulties?
S. L. Lots and lots of challenges! (Laughs) My minds shot back to these days when everything went wrong, I would stand on the table and said: “Guys, come on, think about it, this is difficult, what we are doing is difficult. If it were easy, someone would have done it years ago. The good news is that we are good at what we do, and we’ll fix it!” And you know, we actually did!
The technical aspect was complex and gave us a headache, and even now the technology in the market is still recent. It is also very difficult to convince shop keepers to put their hard-earned money into the system, especially as a lot of shops are very small and don’t have much liquidity. Getting agents to adopt the product, training them and making sure that they are serving the customers properly is probably the hardest part, because it is outside of your control. You also need to communicate to customers and educate them, since it’s a completely new service and involved is an inherent element of trust. Yes, it’s all hard…
You know, what we are doing with mobile money is not fun. We are solving a problem for our customers, and that problem is about managing their financing and managing their lives using cash. Just imagine if you are paid your salary every month in cash and everything you buy, every bill you pay, everything you do is in cash, so it’s a huge issue. We are solving a problem, and persuading the customers that the solution we gave to them isn’t worse than the problem that we were are trying to solve also need efforts.
Read more business insight in our next International Report of Innovation and Technology. Publication in April 2015.
Jeanne Yizhen YIN