Jun 11, 2012

What is Driving Safaricom to Promote use of M-PESA for Airtime Top-ups?

P2P (person-to-person) transactions has always been Safaricom’s main selling proposition. But lately Safaricom is actively promoting use of M-PESA for airtime purchases.

There is one main distinct reason why customers decide to use mobile money to top-up their airtime balance rather than using traditional channels — convenience.

Customers use M-PESA to top up because it is convenient. A customers may top up after receiving money in his M-PESA before cashing-out, or he may top-up with the balance that remains in his M-PESA.

Safaricom has never advertised that you can use M-PESA to purchase airtime, and it has never offered customers discounts for doing so, yet 19% of airtime sold by Safaricom as of November 2009 was purchased using M-PESA.

This year, however, Safaricom has incentivised topping-up using M-PESA with bonuses. Customers who top-up with M-PESA are receiving up to 50% bonus airtime. The airtime retailers are worried that Safaricom might push them out of business. 

So What is Driving Safaricom to Promote use of M-PESA for Airtime Top-ups?
There are two possible rationales for doing so.

The first is to try to lower the cost of airtime distribution; typically, the value of commissions that mobile money agents are paid in order to process cash-in transactions is smaller that the margin which airtime retailers retain when they sell airtime, so shifting sales from one channel to the other reduces the cost of goods sold.

Airtime top-up might be a gateway to usage of the other mobile money products. The idea is that if you can get a customer comfortable topping up using mobile money, then they will be more likely to start sending money, paying bills, and using other services.