Tribulations of the M-PESA Agent

M-PESA is the mobile money transfer platform introduced in Kenya by Safaricom - Kenya's arguably dominant mobile network operator. It is a fact that M-PESA has revolutionized lifestyles of Kenyans in the last three years. To-date there are about 20,000 M-PESA agents in Kenya according to statistics from Safaricom. It is the extensive network of M-PESA outlets that Michael Joseph - former CEO of Safaricom attributes to the phenomenal success of the M-PESA money transfer system (see my notes on ‘reflections with MJ’ in October 2010). Although the former CEO's assertion remains arguable, the significance of the agents and their outlets cannot be overstated in analyzing the money transfer system's success.

Recently I engaged a couple of M-PESA agents in some discourse to try and understand their contribution to the platform's success. Perhaps it is because of our age old tendency to complain over everything that I caught a few concerns that would qualify to be the 'Miseries of the M-PESA agent'. Here are some :-

1. SMS trickery
M-PESA in Kenya is revolves around SMS texts exchanged between individuals, agents and suppliers as 'promissory notes'. The promissory notes  in form of text messages are guaranteed by M-PESA agents deposits with Safaricom (also known as float) through a trust deed (read more on this and an early 2009 systems audit report). With the maturity of M-PESA as part and parcel of our society, even the fraudsters have jumped on board to make their contribution in the diverse society. Agents have in the recent months fallen prey to these 'cleverer' citizens who send fake system withdrawal messages at outlets. Unsuspecting attendants failing to scan the entire SMS message for authenticity dish out money only to discover the trickery when the fraudsters has  vanished.

For readers wondering just how that can happen see an earlier post on this blog of a 'transcript' detailing a real example of such an incident. Of greater concern to the agent is the fact that their contract with Safaricom pushes liability for such losses to the hapless agent.

It might be easy to say that the amounts stolen by the fraudsters using this method is little and theoretically limited to Ksh.35,000 (Approx USD 440) per instance. However those who are privy to operational details of  small enterprises like M-PESA outlets might know that once an outlet is hit with theft of such an amount, it could take months to recover. A complete closure is also possible for such affected outlets.

2. Service Outages
Earlier in the week of  8th November 2010, Safaricom put out advertisement in traditional press and social media notifying M-PESA users of a scheduled downtime that would last most of the weekend from Saturday 13th 9pm to Monday 15th 6am. The scheduled outage would be due to a planned upgrade of the money transfer platform. A service outage for a whole day meant loss of a day's worth of revenue (commissions) by agents. The planned upgrade was later suspended on 11th November 2010, supposedly due to other unrelated outages of the Safaricom data network, that had to be brought under control first. I was curiously shocked to learn that Safaricom had a reason to bring down a service so critical to Kenya's economy for over 32 hours. For a moment then I thought service availability was not an important service quality metric to Safaricom. I defer my curiosity for now until they announce the new upgrade schedule.

Scheduled outages not withstanding, it is not rare for M-PESA agents to be found helpless by customers who cannot be served because 'the network is down'. The same is experienced by customers themselves from their phone when thet occasionally try to transfer money to others only to get a message that their transfer was not successful (to try again after ten minutes). Worse cases of service reliability affect M-PESA agents when a customer deposits money and there is a delay in the receiving the deposit confirmation text (on the customer's phone). The  agent is left in a precarious position of mistrust with an impatient customer who might not believe that their confirmation message will eventually come (perhaps after 20 minutes).

It is these planned and unplanned system outages (or degraded performance) that occasionally make the M-PESA agent a helpless businessman. Their supplier is also so powerful that they have no chance of negotiating favorable service level agreements to protect their small businesses from effects of such diminished service quality. Safaricom deserve a little more credit though. From the planned upgrade, it appears they have realized a need to improve the quality of their service (including increasing maximum transaction throughput from 70 to 200 transactions per second). Although the planned platform improvement might alleviate some of the recurrent outages, the little bargaining power of the agents will remain a matter of concern.

3. Employee theft
A blog post by @coldtusker sometime last year once attempted to highlight the culture of dishonesty among other costs of doing business in Kenya. Dishonesty can be argued to be prevalent among employees in Kenya.  Arguably, the desired combination of reliability and honesty among our workforce remains quite elusive. M-PESA attendants are not aliens to the purported culture of dishonesty. It should be correct to say that mobile money transfer systems include elaborate mandatory record keeping – some of which are electronically hosted by the money transfer platform. However many people forget that for as long as attendants must handle real money at some point, a temptation to steal or divert money meant for their outlet's operations exists.

Dishonest employees combined with an inept law enforcement system means that the M-PESA agent has to pray every day for their attendants not to yield to stealing temptations. The current police and justice system is such that it may be obvious who stole but nothing beyond knowing the thief is doable. It is this ever present fear of losing an outlet's cash that can permanently keep the M-PESA agent crossing their fingers. Some insurance companies I am told offer insurance cover against such losses but with 20,000 shillings 'excess' fees for any theft instance claimed. The insurance cover then rarely to makes sense to M-PESA agents since typically lost amounts are about the same as the 'excess'.

4. Fake Currency
A couple of weeks back I was listening in to one of our morning radio shows. Then there was this exasperated caller who was narrating how someone had deposited fake 20,000 shillings notes at their M-PESA outlet. The outlet's attendant had discovered the fake notes and alerted the local police before the conman had left. The police arrived at the scene, confiscated the fake notes, and left with the conman in 'custody'. To the astonishment of the agent, the police did nothing to assist agent who had already 'received' the fake deposit - hence deducted from their float. According to the caller, the conman eventually went scot free. With the current arrangement, no form of assistance was to be expected from Safaricom for mitigating such risks since the 'nonnegotiable' liability remains the agent's.

Long Conclusion
There are many other experiences that add up to bad ordeals for M-PESA agents ranging from general risks in the external environment to business risks directly related to the nature of outlets operations. It should not surprise many that the much touted 20,000+ M-PESA agents are really not having sustainable businesses. It might also be that the extensive network of agents is the single biggest success factor of Safaricom's M-PESA platform for money transfer. In that case, with the above sentiments of M-PESA agents, it is the same factor that Safaricom has not quite controlled to their favor. Some of the M-PESA agent's troubles appear to be way out of reach in Safaricom's external environment. It is however the same environment that an entity of their size and might could work with the government to influence – for their favor. Some of the mitigation measures are as basic as additional agent capacity building.

Incidentally, Telkom Kenya have recently launched their feature rich OrangeMoney platforms. Essar Communication's Yu is inducing M-PESA agents to become YuCash agents. Bharti Airtel is also sustaining their onslaught on Safaricom's dominance on various fronts including propping up its lower priced ZAP platform. The long term success of these competing mobile network operators in the money transfer market might just as well be pegged on how aptly they handle their value chain – including their dealers and agents.

All that said, I shall try not to contradict my earlier post on value proposition to Kenyans as the ultimate success factor and suggest that “The most significant success factor for mobile money transfer operators working in Kenya will be their value proposition to Kenyan stakeholders including their customers, agents, and shareholders”. In my opinion, patriotic sentiments and feel good aspects such as corporate social responsibility will take a back seat and value drivers (including market forces) will determine future growth paths for the competing mobile network operators.