Vodafone transfers m-Pesa control over to new joint venture

A joint venture owned by Safaricom and Vodacom has been handed the reigns for money transfer, financing and microfinancing service m-Pesa from Vodafone.

The transaction was first announced in 2019, the aim is to accelerate the growth of m-Pesa by giving both Safaricom and Vodafone-owned Vodacom full control, including product development and support services, as well as decided to which markets it will be expanded to in the future.

Financials for the transactions are unknown, though Safaricom suggested it could be worth about $13 million last year.

“This is a significant milestone for Vodacom as it will accelerate our financial services aspirations in Africa,” said Shameel Joosub, Vodacom Group CEO. “Our joint venture will allow Vodacom and Safaricom to drive the next generation of the M-PESA platform – an intelligent, cloud-based platform for the smartphone age. It will also help us to promote greater financial inclusion and help bridge the digital divide within the communities in which we operate.”

“For Safaricom, we’re excited that the management, support and development of the M-Pesa platform has now been relocated to Kenya, where the journey to transform the world of mobile payments began 13 years ago,” said Michael Joseph, outgoing Safaricom CEO. “This new partnership with Vodacom will allow us to consolidate our platform development, synchronise more closely our product roadmaps, and improve our operational capabilities into a single, fully converged Centre of Excellence.”

Launched in 2007, the popular mobile money service is currently being used by 40 million customers, operating in Kenya, Tanzania, Lesotho, Democratic Republic of Congo, Ghana, Mozambique and Egypt. m-Pesa was also launched outside Africa in Afghanistan. Currently, only 25% of m-Pesa customers have access to a smartphone, though this number is increasing by 10% each year. The more customers who are on a smartphone, the more complex and varied services which can be offered by Vodacom and Safaricom.

Vodafone snubs Libra in favour of M-Pesa

Vodafone has withdrawn from Facebook’s digital currency initiative Libra, as regulators and bureaucrats circle overhead.

While Facebook might have become accustomed to sitting in the regulatory spotlight, it seems other companies are not as accepting of the attention. In an increasing tsunami of regulatory scrutiny, Vodafone has become the latest company to withdraw from the Libra initiative, joining the likes of Paypal and Mastercard.

“Vodafone Group has decided to withdraw from the Libra Association,” a Vodafone spokesperson said.

“We have said from the outset that Vodafone’s desire is to make a genuine contribution to extending financial inclusion. We remain fully committed to that goal and feel that we can make the most contribution by focusing our efforts on M-Pesa. We will continue to monitor the development of the Libra Association and do not rule out the possibility of future co-operation.”

After work on Libra initially started in 2017, Facebook plans to launch the digital currency this year. The plan is to peg the Libra token to the financial performance of commoditised assets in an attempt to avoid the volatility of other digital currencies. The likes of Bitcoin and Ethereum have dented confidence in the currencies to date, as while the idea is sound, the 2018 cryptocurrency crash, where the value of Bitcoin dropped 65%, shows the dangers.

The main issue with digital currencies is that this is a segment which is largely unregulated, leading to the challenge which is being faced by Libra today. The European Commission and European Parliament has said no to the likes of Libra until rules have been written, while other regulatory bodies have expressed similar disapproval.

PayPal, Mastercard, Mercado Pago, eBay, Stripe, Booking Holdings and Visa are some of the names to have withdrawn support, seemingly due to the regulatory pressure. With support dwindling and regulatory expectations an unknown for the moment, it remains to be seen whether Libra will continue on its current launch trajectory.

Although Vodafone has left the door open for the future, it will drive its efforts towards M-Pesa, the highly success digital currency which is setting the tone in Africa.

Founded by Vodafone in 2007, M-Pesa is a mobile phone-based money transfer, financing and microfinancing service. Initially launched for Vodacom and Safaricom in Kenya and Tanzania, the initiative has spread across several markets in Africa, to India, the Middle East and Eastern Europe. There is momentum for the M-Pesa initiative, so it hardly comes as a surprise Vodafone has dropped the controversial Libra.

Many would view M-Pesa as an underexploited asset for the Vodafone Group, though this is likely to change over the coming months. The team plan on expanding the service in the seven African markets it currently operates in, and even plans to launch in Ethiopia, a market where it does not currently manage a mobile network.

M-Pesa can already be used to pay salaries, settle invoices and pay for bus tickets today, but Vodafone is aiming to fill the void of traditional banking services, a major issue across much of the African continent.

The ‘unbanked’ challenge in Africa is not necessarily new news, the World Bank Global Findex suggest 62% of sub-Saharan Africans do not have a bank account, and digital currencies could fill the void. There is of course competition to be wary of, Orange Money or MTN Mobile Money for example, but M-Pesa has credibility in the market few could compete with.

With new infrastructure solutions gaining traction, OpenRAN, and a wave of new smart feature phones being released, the digital world is becoming increasingly accessible. M-Pesa is in an excellent position and Vodafone has a genuine opportunity to be a trailblazer for diversification into financial services alongside Orange. Perhaps it should come as little surprise the telco wants to distance itself from the increasingly under-fire Libra initiative.