4 June 2010
Subject: In this post I attempt to estimate “critical mass” financial numbers for a mobile money to the unbanked (MMU) service to be sustainable.
I’m a few weeks late in publishing this, it just slipped off my radar. Attended the GSMA Mobile Money Summit last month in Rio. Great people in attendance, although the event itself leaved much to be desired. The MNOs had a focused set of meetings on the opening Monday covering “how to work with regulators” which is certainly a key to success. I was struck by the volume numbers in country pilots.. they are so small.
Safaricom released earnings at the beginning of the month. This data coupled with the data from the Mar 2010 Gates foundation report provides insight into the challenges faced by new payment mechanisms in other emerging markets. Market approaches will surely be tested as other countries attempt to replicate the MPESA success. It has taken 3 years, and some very unique market conditions, for Safaricom drive this service into profitability.
Summary
- MNOs must reach around 8M users (or around $300-500M per month GDV) to break even
- Bill Payment is key to driving payment volume in emerging markets
- Without a regulatory partnership everyone looses. Phillipines wins prize for best bank, MNO, regulatory partnership in the world.. if you want an example of success talk to Rizza at GCASH.
Safaricom Revenue Data
Safaricom Annual Report shows MPESA “Total Annual Revenue” of 7.56B KES ($93M USD, 9.48M users) for the year. Gross Volume is not published.. but there is other “anecedotal data” to give more color:
- transferred a cumulative Sh405 billion since launch
- US $320 million per month in person-to-person (P2P) transfers
- US $650 million per month in cash deposits and withdrawal transactions at M-PESA stores (Gates foundation)
- Average Sh1.8 billion a day ($670M per mo total). In Earnings release. (does not align w/ number above)
- Grew from 5M to 9M users in 2009
- Interest from $1B+ settlement funds is not included in either Vodafone nor Safaricom’s earnings. Understand there is agreement between CBK and other parties to use for infrastructure, education and microfinance.
- Note: The Gates foundation numbers on P2P and Tran volume seem high.. I’ve never had them before
Calculation
- Given growth of 100%, assume average 2010 (May-May) volume GDV of 320+650/2 = $485M USD
- Monthly revenue of $93M/12 = $7.75
- Take Rate = 7.75/485 = 160bps (seems about right)
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