10 EBR #2 2012

cover story Betty Mwangi-Thuo

Basic facts NAME Betty Mwangi-Thuo TITLE General Manager of Financial Services
COMPANY Safaricom AGE 43 HEADQUARTERS Nairobi
EBR #2 2012 11
Globally, mobile money has not yet lived up to the hype.
Yet in Kenya, leading operator Safaricom has built a mobile
money juggernaut with its MPESA
service. With a user base of more
than 15 million subscribers,
MPESA is both raking in reve
nue and extending nancial
services to entirely new
sectors of the population.
Whats the secret? Betty
MwangiThuo, General
Manager for Financial
Services at Safaricom,
reveals how Kenyans
are succeeding
where almost
everyone else
has failed.
Itsnotabout
thephones
An Af rican
success story revealed:
TEXT Nathan Hegedus | PHOTOS Chris Maluszynski
12 EBR #2 2012
M
PESA WAS NOT conceived as a stand-
ardized mobile-money service. In-
stead, it evolved organically on the
streets of Kenyan cities and villages. Yet
r-vvs has dramatically changed both the
global mobile-money market and daily Ken-
yan life, making the streets safer, empower-
ing women and spurring economic develop-
ment, from deepening the credit market to
making long-distance money transfers cheap-
er and easier.
Oh, and its also making Safaricom lots of
money, accounting for more than 1z percent
of the operators revenue in zo11.
So how did Safaricom pull this off, far from
traditional centers of innovation in Europe
and North America It adopted a three-
pronged strategy:
3
the company committed the financial and
human resources of the entire organization
to the project, especially in developing its
network of customer agents
3
it saw r-vvs as a brand-building value-
added service and kept revenue expecta-
tions low
3
most importantly, Safaricom listened to the
Kenyan people.
So if r-vvs was not initially a commer-
cial mobile-money service, what was it It
was a microfinance project, funded jointly by
Vodafone and the British Government. Yet
from the beginning, r-vvs subscribers
started using the service to transfer money
between themselves, filling a newly obvious
gap in the Kenyan financial services sector.
IN , VODAFONE AND SAFARICOM (which is
partially owned by Vodafone) adapted and
rolled out r-vvs as a commercial peer-to-
peer transfer service, centered on an exten-
sive and expensive network of agents to
get cash-in, cash-out services as close to us-
ers as possible.
A few months later, Betty Mwangi-Thuo
an electrical engineer by training came on
board to run the deceptively simple service.
Her task To turn a pilot project into a
business.
And by all accounts, she succeeded. With-
in a year of its launch, r-vvs (the r stands
for mobile and the word pesa is Swahili for
money) had 1 million subscribers. In five
years, it has grown to more than ;,ooo agents
and more than one-third of the countrys
population. In a presentation, the Governor
of the Central Bank of Kenya, Njuguna
Ndungu, noted that as of December zo11,
r-vvs users had transferred a total of 116.6
billion shillings (uso 1. billion), while sub-
scribers of the services closest competitor,
Tangaza, had transferred 1.1 billion shillings
(uso 1.; million).
Its just touched the very soul of the coun-
try, Mwangi-Thuo says. Its humbling. I have
relatives who say, I dont know what I would
have done without this.
MPESA COMPRISES four core services: paying
bills, purchasing airtime, transferring mon-
ey to both other users and non-users, and de-
positing and withdrawing money.
Around the world there is no mobile-mon-
ey success story quite like r-vvs. Constant-
ly promoted as the next big thing even to-
day the concept has led operators, banks,
and credit-card companies on a far-reaching
search for the right formula for mobile wal-
lets, mobile payments and so on.
In retrospect Kenya was a fertile market
for mobile money. It had a relatively large
number of mobile users and offered
High versus lowburn
MPESA IS A RUNAWAY SUCCESS in Kenya. But
can it be replicated elsewhere A look at
neighboring Tanzania highlights the
slow-burn strategy that Vodafone is using to
build r-vvs in a different kind of telecom
market.
Tanzania and Kenya may be East African
neighbors but, in terms of mobile money, it
is more important to look at their differenc-
es than their similarities.
In terms of area, Tanzania is about twice
as large as Kenya. It is less densely populat-
ed and has a significantly lower mobile-pen-
etration rate: in zo11, it was still only z per-
cent after years of dramatic increases, com-
pared with a more than 1oo percent pene-
tration rate in Kenya.
Vodafone rolled out r-vvs in Tanzania
through its subsidiary Vodacom Tanzania in
zoo8, just a year after Safaricom introduced
the service in Kenya. From the beginning,
the company has taken a different tack in
Tanzania a slow-burn strategy compared
with the fast-burn methods used in Kenya,
where Safaricom invested heavily up front
in a large network of agents.
FOR THE FI RST COUPLE OF YEARS, r-vvss
growth in Tanzania seemed to lag signifi-
cantly behind the services growth in Kenya.
But in retrospect, much of this gap can be
attributed to the differences between the two
markets. The size of Tanzania, compared
with its relatively small urban centers, made
it hard to put an effective agent network in
place. In addition, Vodacom Tanzania lacked
the strong market presence that Safaricom
had in Kenya, and r-vvs in Tanzania has
faced strong mobile-money competition
from the beginning from companies like Air-
tel (formerly Zain) and Zantel.
Yet the slow-burn strategy is paying off,
especially after the important changes that
Vodacom Tanzania made to simplify its mar-
keting strategy and price structure. The com-
pany added more than million users last
year, bringing its market share up to o per-
cent overall, with Managing Director Rene
Meza citing r-vvs as the primary driver.
CONSIDERING THE MARKET in neighboring Tan-
zania, Mwangi-Thuo agrees that each mar-
ket presents a new set of challenges. But
there is no reason r-vvs cannot succeed
in any number of countries, she says.
If you look at developing economies,
there is nothing spectacular about Kenya,
she says. There are many countries where
people support other people remotely.
r-vvs is already available in South Africa,
Afghanistan and Tanzania, and its about to
launch in India. Are there opportunities in
other countries Yes.
Thi s i s money we are t alki ng about . You have to have trust.
Safar icom has always been a Kenyan ser vice Kenyans are proud of i t .
EBR #2 2012 13
Even my life has changed, says Mwangi-Thuo.
The other night, I heard from a person in distress.
Shed had an accident. I was able, with a push of a
button, to push money from my bank account and
send it to her. This is life.
Betty Mwangi-Thuo cover story
14 EBR #2 2012
Background check
Employment
2011present: Safaricom, General
Manager, Financial Services business unit,
Nairobi
20072011: Safaricom, Chief Officer
New Products and Services Division,
Nairobi
20022007: Afsat Communications
Africa, Chief Marketing Officer, Nairobi
20012002: Medex Marketing, Managing
Director, Nairobi
19962001: SmithKline Beecham
International, Demand Management and
Special Projects, Nairobi
19931996: Wilken, Manager Telephones
Division, Nairobi
1991: GPT, work on theoretical
assessment of proposed radio
telecommunications links, Coventry, UK
Education
2004: MBA, University of Leicester, UK
1993: Diploma in Marketing, Chartered
Institute of Marketing, International
College, London, UK
1990: B.Sc. in electrical and electronic
engineering, Victoria University of
Manchester, UK
cover story Betty Mwangi-Thuo
EBR #2 2012 15
limited access to banking services. It had
an urban population that supported a ru-
ral one, but with a poor infrastructure for
transferring money. Millions of people re-
lied on bus drivers or friends to deliver
money to across great distances, leaving
much of the population vulnerable in the
event of personal emergencies, droughts
and other natural disasters.
Just as important, Kenya had a regulator,
the Central Bank of Kenya, which proved
exceedingly open to innovation first, regu-
lation later, allowing r-vvs to develop out-
side the traditional financial-services indus-
try. The uncertain position of r-vvs in re-
lation to the established banking system
worried the original r-vvs team greatly,
and the Central Bank could have killed the
project from the beginning.
But the regulator has been really, really
helpful, starting when the project was in pi-
lot in zoo and zoo6, Mwangi-Thuo says.
We reach out and collaborate.
THE REAL SECRET to r-vvss success lay in
Safaricoms relationship with its custom-
ers: a two-way relationship that allowed a
strong incumbent to innovate like a scrap-
py startup.
First, Safaricom made it a top priority to
develop an extensive network of r-vvs
agents a pricey high-burn strategy that
required the full commitment of the entire
Safaricom organization.
One of our core successes was the com-
mitment of management, Mwangi-Thuo
says. We had to be ready to put in the
money and resources necessary for a good
distribution network so that people would
not have to travel far again to access their
money. That would have defeated the whole
purpose.
Yet thousands of agents would have
meant nothing if users had not trusted Sa-
faricom (which got its start in 1,,; as a sub-
sidiary of state telecom agency Telkom Ken-
ya) with their money.
THIS IS MONEY we are talking about, Mwan-
gi-Thuo says. You have to have trust. Sa-
faricom has always been a Kenyan product.
It is owned by Kenyans. Safaricom has al-
ways positioned itself around finding solu-
tions for Kenyans, and Kenyans like that.
Kenyans are proud of it.
It was also key that Safaricom did not ex-
pect an immediate return on its investment.
The operator saw mobile money as a pure
value-added service, a way to cement its
bond with its customers.
On this level, the service succeeded be-
yond all expectations. The company
It s just t ouched the very soul of the country. It s humbli ng.
I have relat ives who say, I don t know what I would have done wi t hout t hi s.
Mobile data, SMS and M-PESA contribution to Safaricoms ongoing revenue
30
%
25
20
15
12.9
6.9
4.3
2.2
18.8
6.5
3.7
9.4
26.0
Total data revenue
M-PESA
SMS
Mobile data
The three revenue channels now contribute over a quarter of revenues
and are gradually offsetting the decline in voice revenues
13.4
8.5
6.1
10
5
0
FY 2009 FY 2010 FY 2011
Source: Safaricom Full year 2010-2011 results
16 EBR #2 2012
remains the strongest operator, with more
than ;o percent market share, even as the
Kenyan market has been flooded with tough
competition from operators Airtel Kenya
and Orange Wireless, both in mobile mon-
ey and in voice and data platforms.
BUT IT IS IMPORTANT to remember that the
user relationship at the heart of r-vvs is
what sets it apart from other attempts to
play the mobile-money game. The services
success has depended on subscribers con-
tinuously providing feedback to Safaricom.
And because Safaricom has listened, it
has been able to climb several steps up the
user-experience ladder. To back this up,
Mwangi-Thuo cites consumer education
against fraud as one of her highest priori-
ties, as well as the importance of simple,
consistent advertising. All this attention to
customers has paid off with good buzz,
great loyalty and a service that became an
integral part of Kenyan society.
Our road map and plans are driven by
subscriber feedback, Mwangi-Thuo says.
We want to know what our users want to
see more and more of on the platform. We
do a lot of research because, as an innova-
tive new company, there is nowhere else in
the world we can look.
IF YOU REVIEW THE HISTORY of r-vvs in
Kenya, you will see that the peer-to-peer
component was always a very important
part of the company. For a long time, we
have had urban communities that are large-
ly supporting rural communities, so people
have always traditionally been sending
money home, but now, as you get more and
more services on the platform, people also
want to use it to pay their water, electricity
and :v bills, for example.
And, once again, Safaricom has listened,
rolling out payment agreements with utili-
ty companies, supermarkets and other re-
tailers. Employers are also able to pay sala-
ries through r-vvs. Going a step further,
r-vvs is now integrated with more than
z banks, both local and international, that
operate in Kenya. With this integration,
banked subscribers can use r-vvs to ac-
cess funds in their bank accounts.
IN THE DEVELOPED WORLD, much of the mo-
bile-money talk is about near-field commu-
nication (rc) and how operators can
compete against or cooperate with the
big credit-card players like Visa and
MasterCard.
And while Safaricom is on top of these
trends, having entered into local agree-
ments with Visa and carried out extensive
research into rc, they simply dont reflect
the current reality of the Kenyan market,
Mwangi-Thuo says.
rc hasnt even picked up in Europe,
she says. Are we looking at rc Of course.
But its quite an expensive technology, and
we need to look at its return on investment.
MWANGI THUO IS ESPECIALLY suited to this
constant evolution. As a young child in
Nyeri, a town near Mount Kenya, she loved
to tinker, taking apart radios and other elec-
tronic devices just to see how they worked
(even if she could rarely put them back to-
gether again).
Her parents (her father is in business,
while her mother runs a school) were sup-
portive of her early knack for math, science
and all things technical traditionally
boys subjects, in other words.
They didnt distinguish between us
[Mwangi-Thuo and her two siblings], she
says. There was nothing that was just for
boys or just for girls. They believed that you
just go get what you need to get. Go for it.
I dont know why they were that progres-
sive. You would have to go talk to them.
Later, she headed to the u to study, earn-
ing a degree in electrical and electronic en-
gineering from the Victoria University of
Manchester, where she was one of only
three women in a class of z students.
After graduation, she returned to Ken-
ya and quickly moved out of engineering
and into business. She worked at the phar-
maceutical firm SmithKline Beecham In-
ternational for five years, then served as
Chief Marketing Officer at Afsat Commu-
nications Africa, where she managed a
distributor network operating in z6 Afri-
can countries.
BUT SHE SAYS SHE has never forgotten her en-
gineering training, crediting it for her suc-
cess in everything from managing an inter-
national supply chain to driving r-vvs.
It is the discipline of process thinking,
the methodology, she says. Get that, get
that, get that. You cant take shortcuts or it
will just blow up in your face.
Today she is General Manager of the Fi-
nancial Services business unit at Safaricom,
the leader of the runaway success that is r-
vvs and considered one of the most pow-
erful women in the African telecom indus-
try. She says she likes being on the business
side of things she likes people too much
but she also enjoys the technology aspect
of telecom. As for tinkering, she says that
while she no longer takes apart radios, she
still loves to tinker, but not in the same way
as before.
While I dont have time to tinker like that
anymore, the tinkering I do now is real and
live, in my work. Because we constantly
have to be coming up with [ideas]: What if
we did this, what if we did that Thats how
the tinkering has evolved.
We like t he compet i t i on. Act ually, we want t he compet i t i on because i t gives
t he i ndust r y credi bili t y. We dont view it as a threat. It s good i f more
player s are i n t he market .
What do you see yourself doing
in five years, and in 10?
I hope that, in fve years, I will still be actively engaged in things that positively impact
Kenyan lives, either where I am at the moment or elsewhere. Thats something I fnd I completely
enjoy. In 10 years, it would be kind of nice if I could just retire early. No, seriously, it would be nice
to continue in this feld of impacting people quietly. Its about changing lives.
EBR #2 2012 17
Betty Mwangi-Thuo cover story
Mwangi-Thuo says she has never faced overt sexism
as a woman in telecom: I have been particularly lucky
with where I work. In fact, they are very pro-women.
Gender is big for them. And I think this is changing in
Kenyan society as a whole.