“The [MPesa] pilot project didn’t always look destined to be a success.”
I have been recently enjoying a series of podcasts 50 things that made the modern economy from the BBC world service. The episode on MPesa changed my perception of how mobile money in the developing world became such a success story. It demonstrated to me that telcos are capable of cutting edge innovation and new business success. It also demonstrates that they are only capable of this if they can allow themselves to experiment and change their business model with evolving markets.
MPesa was originally developed as a niche application to allow repayment of micro finance loans. The MPesa Microfinance service, based on SMS, provided a valuable service but to a very small group of people. Then people started to use the service…..
“Vodafone thought it had invented a tool for loan repayment, but Kenyans had taken that tool and had used it to reinvent money itself.”
Today nearly 20 Million Kenyans use mobile money, representing nearly 50% of Kenya economic transactions. Vodafone by creating a ‘Leap frog’ technology exposed Kenya’s inefficient banking system.
This story is extremely relevant to telecoms desired success in IoT and digital services. As long as the Telcos focus remains on the communications environment for these new services, rather than what these services are or could be the Telcos are likely to remain a bit player of commodity bandwidth to these areas.
“Why did it [MPesa] take off in Kenya? …. one reason was the relaxed approach of the banking and telecoms regulators.”
The story is also an example of where regulation can potentially enable or disable an innovation. If we want telco innovation in other industries, then regulation needs to support this. Too often regulation can have the effect of imposing the existing telco business model; leaving the route open for disruption by “Over the Top” players.