Jul 21, 2012

Merchants mobile payments motivations: increase in sales vs cost reduction


M-PESA has changed the economics and shaped the power play in the payments value chain in Kenya. The ubiquity of M-PESA has provided a decentralised platform for managing payment processes in a new way, but the value proposition for merchants (businesses that sell to consumers) has yet to be elaborated clearly.

Cash is still king in Kenya. Cash remains by far the most common way of collecting money from end-customers. Merchants are using M-PESA as an alternative payment channel and they are not actively promoting it.

At the end of the day what is really important and what really matters to most merchants is simply getting paid. After this, merchants want to know if accepting M-PESA will significatly increase sales. M-PESA also helps reduce costs for both the merchant and the customer. But that is less important to merchants than increase in sales.But costs do matter to merchants when they directly affect profitability.

Accepting M-PESA  will help merchants drive sales by enabling them to find new customers, increase loyalty of existing customers and increase the spending power of customers.

 M-PESA will help merchants lower external costs of payments acceptance (M-PESA is cheaper than than cash,checks and credit card), lower internal cost of transaction handling and reduce fraud and related costs.

M-PESA services for businesses

·    Pay Bill Pay Bill service is for non-face-to-face C2B payments. Pay bill payments are also customer-initiated and the customer has an official relationship with the organization they are making the payment to and usually have a prescribed account number which helps the organization identify the payer. Pay bill payments are made within a fixed timeline e.g paying your electricity bill monthly to Kenya power.

·     Buy Goods — Buy Goods payments are for immediate purchases for goods and services from a merchant, that is, face-to-face C2B (customer-2-business) payments. The payments are push transactions meaning that they are initiated by the customer.The customer has no official relationship with the merchant. This is the same service you find at Uchumi, Naivas supermarkets and Ashley's salons.

·   Bulk Payments  for business-to-consumer (B2C) payments. This was conceived for salary disbursements but may be used for any outgoing payments. These payments are initiated by a business using a web tool which can link to the Pay Bill web tool.


In a nutshell, merchants can use M-PESA to acquire more constomers, increase customer loyalty, improve efficiency and drive higher revenues while reducing the cost of handling cash. A lot of merchant education needs to be done for merchants to really appreciate the value mobile payments will bring to their businesses.

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