While Kenyans use M-Pesa to send and receive cash and pay for goods and services, Ethiopians have taken a different tack.
Safaricom expected rapid adoption in a cash-based economy with low credit card penetration and many rural markets needing connectivity.
Instead, Ethiopians mainly use M-Pesa to buy airtime and data, ignoring its other offerings such as sending cash, borrowing and paying insurance costs.
This appears despite the operator growing its M-Pesa subscriber base to 8.31 million since the platform launched in August 2023 in Africa’s second most populous country, which is seen as the “last frontier” for digital banking.
“M-Pesa users in Ethiopia mainly buy airtime products and data. 20 percent of sales (packages and airtime) go through the M-Pesa channel initiated by top-ups,” said Wim Vanhelleputte, CEO of Safaricom Tecommunications Uganda Plc, in an interview. Subjectivity.
The increasing use of voice and data is reflected in Safaricom Ethiopia’s revenues of Sh4.1 billion in the six months to September.
Mobile data revenue accounted for more than half of sales at Sh3.2 billion after rising 144.3 percent in the half-year.
Voice and messaging revenues grew by 27.1 percent and 98.4 percent to Sh516.4 million and Sh36.7 million, respectively.
While M-Pesa’s revenues doubled during this period to Sh24.4 million, it remained a spin-off of 0.58 per cent of sales.
Kenyan success
This is in contrast to Kenya, where M-Pesa leads Safaricom’s revenue and has emerged as a driver of the telco’s profits.
Sales in Kenya grew by 12.9 percent to Sh177.4 billion with M-Pesa revenue reaching Sh77.2 billion in the six months.
M-Pesa has more than 50 million customers in seven African countries – including two with large populations, Egypt and the Democratic Republic of the Congo.
But Ethiopia is home to 120 million people, making its telecommunications market — a monopoly since 1894, when Emperor Menelik II installed the first line between Addis Ababa and the eastern city of Harar — the key area to break into.
Describing it as a virgin territory, with acres of room to grow, Safaricom hoped to replicate the success of mobile money in Kenya, where it is credited with bringing tens of millions of unbanked Kenyans into the financial system.
But Safaricom was not blind.
It previously identified the dominance of cash in Ethiopia as a barrier to the growth of the country’s payments business, highlighting the prevalence of cash, especially for small value transactions.
“Urban banking penetration is relatively high, but 99 percent of small value transactions are in cash,” Safaricom Plc told investors in February this year.
Safaricom strategy
A 2021 World Bank report on digital payments and financial inclusion noted that cash in Ethiopia is by far the population’s dominant method of payment, unlike other regional markets such as Kenya.
Ethiopia also has lower levels of cash transfers from urban to rural areas, unlike Kenya, where remittances helped Safaricom expand its M-Pesa services after its launch in 2007.
Safaricom believes that the social structure in Ethiopia is less oriented towards town-to-village remittances, which constitute a large proportion of transactions in Kenya.
The number of three-month active customers in the period under review reached 6.1 million as Safaricom completed its second year of business operations in the market.
The operator expects to increase M-Pesa usage by leveraging its active customer base that already uses voice and data services consistently.
“The opportunity is there to convert and encourage voice and data users to also start using M-Pesa services because they are fully enabled. Products and services are also there, including lending and insurance products,” Mr Vanhelleputt added.
“It’s actually the voice and data customers that will drive our 1 million users on M-Pesa in the next few months.”
Safaricom Ethiopia continued to see an acceleration in customer numbers and usage during the six months to September, including active voice, data and SMS users.
Customer momentum supports its network expansion as the telco reached 3,008 base stations in the period, up from 2,057 locations previously.
The company says growth in the subscriber base remains the most important task for its operations in the country at the moment.
“As a startup, we’re on a journey where we go from acquiring users to driving usage and setting a rate at which you can monetize,” Mr. Vanhelleputte said.