A Historic Moment for Mobile Transactions

On February 2, 2011, at 18:41pm ,a Mobile Transactions agent made an order AND paid for 200 bags of roller meal for a total value of K6,000,000 (USD$1250) using their mobile phone. This might very well be the first time anyone in Zambia has done anything like this. In two years time, when every retailer in Zambia is using their mobile phone to order from their suppliers and we are rolling this product out in new countries, this will be a historic event to look back on.

Starting in December, Mobile Transactions has been quietly developing a potentially transformational product. It's an online ordering and payments system that can be accessed on mobile phones. The idea is that retailers can log on to the system on their phones, search for the products they want - anything from cooking oil to bars of soap to fertilizers - and instantly make orders and payments using their Mobile Transactions account. Suppliers can add new products, update their pricing, and offer delivery/collection options to the retailers.

It's an online, cashless marketplace where everyone wins. Retailers save the hassle (and danger) of running around town with cash in hand, searching for the right price, making orders, and paying for transport to get the goods back to their shop. Suppliers get access to new retailers, have the opportunity to increase sales, and save on the huge risks involved with handling cash. Smaller retailers and suppliers, in particular, stand to gain a lot, as the system opens up the market and makes prices more transparent.

The vision for this product is a grand one, but the process of getting there will likely be more subtle. Our job is to build a complete solution for retailers and suppliers that is so good that they propagate it themselves. It's a bit like Facebook in that way - we want to create a product that initial clients gain more value from by bringing their current business contacts on board. Going viral, creating network effects, whatever you want to call, that's what we're aiming for.

We're at the early stages now, starting with a product that is ubiquitous in Zambia's urban economy - mealie meal, the country's staple food. From there, we hope to bring on basic household goods and agricultural inputs and eventually any product that can be bought and sold. The possibilities are endless but the challenge immense. Can this technology disrupt a cash-based economy? I think it can, if we get the product right, so that's the goal for right now.

Thulasy Balasubramaniam

Ordering and Supplier Payments System Manager

Getting Back Into Management

As a company we went away on a strategic breakaway a few months back and near the end there was a moment of absolute celebration from Mike our CEO when he declared:

“Yes, I finally have Brad in the Organigram”.

I had just been appointed Mobile Transactions Zambia Chief Sales Officer, reporting to Mike as CEO, and with four Sales Vice Presidents reporting to me.

So that has got me to put pen to paper and do my second blog.

I had managed for as long as possible, the last two hugely enjoyable years, to be the business lone ranger: Heading off to new markets and developing new products and channels. While at times effective, equally at times disruptive, times were a changing and my wheeler dealer days in Mobile Transactions were fading fast.

The business has evolved and more than ever what we needed was: focus, discipline and most important: implementation and performance results, basically good management of people and process.

The brief was clear: One market (Zambia), four products (Money Transfers, Vouchers, Micro Finance payments and our new Mobi Ordering and Supplier Payments module (now this is a cool product)) and make it sing.

Going Back to my Roots

It was time to shake off the cob webs and think back to the days when I was a Commercial Director of an MNO and the Managing Director for Zambia of an International Paint brand.

The stresses of a startup are such that Keith our COO who joined us four months ago from an International bank Skyped the following to me the other day when we were reminiscing about corporate days:

[1/20/2011 5:38:02 PM] Keith Davies: It seems like such a long time ago that I've almost forgotten, but that is how good businesses are run. The budget is a function of the strategy and then the people are managed to the budget which in turn should ensure that the strategy is executed. So it is absolutely key that we actually operationalize this budget.

Managing People

One of the biggest challenges in a role like this is managing people.

I hope this comes out right but growing up in Africa and going to boarding school in South Africa from 7 years old I have been bought up in a hierarchical structure with pecking orders and when it is your turn at the top of the pile, well make hey while the sun shines. Given this background and a fair whack of confidence I have never been shy stepping forward in almost any situation. Being in charge and being both accountable and driving things forward is probably something I would embrace rather than pass over.

In most of my past management experience it was on the whole relatively autocratic – both in terms of how I was managed and how I managed my teams. Ten years ago that is how businesses where run here, middle management development was only just starting to be taken seriously, building strategic input from the ground up unheard of, jobs were extremely scarce and if you were a middle manager and were lucky enough to have one you settled in, did not rock the boat and mostly did what you were tasked with. It was a very confining management environment and one of the main reasons I went off to start my own business with my brother.

Fast forward to 1^st January this year and a quick assessment of the VP’s I was being tasked with managing. While no one individual is the same there were certainly some common traits:

· Super bright and capable

· Bullet proof in their inexperience

· Great qualifications

· Very worldly, well travelled and well versed in life

· Humble, good stock

· Really focused on learning and personal development

In addition, lots of opportunity, be it jobs in China, offers of acceptance for MBA’s from the very best International Business Schools etc, certainly attractive options on the table for them, and rightfully so given their caliber and attitudes.

Certainly the take it or leave it, or I am in charge approach would have ensured a quick mutiny and departure of absolutely critical skills.

This had to be countered by the reality that the business was not just strategic but also implementation. The implementation part takes rolling down your sleeves and putting your nose deep into the muck, dive further and just do stuff.

The Bigger Picture

Under Mike’s leadership the Chief Officers were tasked with creating a disciplined and structured business, hell even learning how to say no to all the opportunities and distractions out there.

In addition a lot of work went into aligning strategic focus and getting buy-in and then building budgets and process and plans.

From a sales perspective the key drivers were to generate revenues above budget, establish an effective sales pipeline, create manageable KPI’s and do not lose our skilled resources.

The Approach Taken

Our plan to retain key skilled staff has been to focus on how inspirational Mobile Transactions is

· We are not selling paint, we are a sexy industry

· We aim to be an inspirational African success story. We are tired of stories of Africa being Hollywood’s Blood Diamonds, Last King of Scotland and Hotel Rwanda. African entrepreneurs need role models and Mobile Transactions aspires to be.

Creates an environment where their work inspires them.

· Each VP has ownership and management of their department, products and channel at a Profit and Loss basis

Surround the team with quality people

· As a peer group they are working as a talented group

· They have direct access to Senior Officers who have a wide variety of Corporate and Self Made experience and skills

· Access to advisory Board Members to ensure they are exposed to best practice

· Tasked with up skilling or recruiting top staff reporting to them

Personal growth and development

· Opportunity to manage at a P & L basis

· Monthly reports for Board Submission

· Structured and professional reporting to CSO

· Management of a Key Strategic Project for each resource

· Use MTZ to grow personal network, we encourage open and transparent networking, and this space attracts interest

Open and transparent remuneration

· Everyone works for below market rates, not a great starting point

· We are all geared to closing an investment

· Incentives are only on the table with profitability above budget

· Share options are on the table with a proven track record

What the business needs

· Stuff just needs to get done

· Focus, discipline, implementation

· Best lessons are getting hand dirty and walking the floor

· But, at the same time some of the best and critical successes have come from direct strategic intervention from the VP’s. The introduction of internal Service Level Agreements and also the Effective, Efficient and then Expand model have all come and been driven to working policy by the group

Delegation is great but with clarity and accountability

· Whether ignorance is bliss or not, the worst thing young managers should face is delegation without very clear strategic direction and total clarity of what is expected and required. With focus and feedback, empowerment with zeal is a winner

So how are we doing?

You can never count your chickens before they hatch but the team is making good progress.

· Following on from 1,000% growth last year and budgeted growth of400% this year, measured against this we are 30% above budget on a GP basis YTD

· Sales strategies have been aligned with implementation plans by product

· KPI’s have been agreed and signed off

· Sales dashboard has been actioned

· Sales Pipeline is a breathing work in progress

· Sales Service Level agreements for all internal departments have been signed off

· Weekly sales meeting by VP with IT, accounts, customer care have been institutionalized

· Structured weekly sales meetings are in place

· VP’s are ensuring they walk the floor

· VP’s are managing P&L

What Next

Certainly it has been a productive start to the year and we look forward to proving this team has the ability to quote the mantra: Become effective, then efficient and then expand, and most of all, all the original team remains on board for now.

Truly Innovative

Last week Mobile Transactions Zambia announced a partnership with the MasterCard Foundation and Microfinance Opportunities to explore how financial education training can increase uptake of mobile-based financial services while helping tens of thousands better manage their money.

After thorough market research, Mobile Transactions (MT) will test a strategy to increase usage of its consumer products through financial education. Taking learnings from prototype testing, MT will launch a pilot financial education program that will empower consumers through financial education, improve consumer product delivery and connect more consumers to MT products.

This is Mobile Transactions taking the leading-edge approach. There are three reasons why MT will continue to innovate and win in the consumer space;

Size – Mobile Transactions, compared to its telecom and banking competitors, are much smaller and more nimble. We have no layers of bureaucracy to cut through to get things done. Our development staff skype with our people on the ground, feeding back directly on products.

Speed – Mobile Transactions is faster. We do not wait for ‘Corporate’ to make decisions (which may not meet the needs of the market in Zambia.) We do not fight through layers of approval. We can develop a product quickly without queue-ing behind five other country offices.

People – Mobile Transactions staff are different. We don’t wear suits and ties. We don’t drive fancy cars. Managers have lived in the village and understand our customers better. We are passionate about connecting the unbanked to financial services and driven to succeed.

As we look forward to 2011, the consumer team is excited about our partnership with MasterCard and Microfinance Opportunities. It is the next step in the continual innovation of Mobile Transactions’ consumer offerings.

Dave Vosburg

Manager, Consumer Channels

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Agent Growth

My name is Graham Lettner. I manage the Mobile Transactions (MTZ) Agent network in Zambia.

This blog post has just one point: our Agent network has grown so much since a year ago that it’s near unrecognizable—and the growth is only going to speed up.

The first photo here is where we were at a year ago: Monze, Southern Province, signing up a few Dunavant cotton farmers for MTZ on-phone accounts. It took an hour of presenting, another hour of convincing, and two more hours to open all of the 15 accounts.

Less than a year later, based on changes to our payment model for farmers and the hardwork of a start-up in a fight for our life, we paid literally thousands of auto-registered farmers in Eastern Province in the space of weeks.

When we first started, every employee with a motor vehicle drove up and down Zambia cajoling, coaxing, and prevailing upon mom-and-pop shop o

wners to become Agents on our network. Heck, we gave out phones for free so they could transact and loaned out millions of kwacha for working floats. We didn’t see many of those phones or much of that money ever again—but it’s what was needed to get early traction.

This second photo shows how different things are today. Golden Kamasumba, an early Agent of ours in Mansa, Luapula Province has not only bought space in a new complex in town to have a second Agent location, but on his own initiative he painted his existing shop in our company’s colours. He’s one of our early Agents ready to expand on his own of many of our early Agents ready to expand on his own now that we've fully proven our value proposition.

Last thing: Thomas Friedman wrote about our company in the New York Times the other week. Okay, so it wasn't our company exactly, but a similar start-up in India getting the same kind of traction with mom-and-pop agents across the country. Really, the only difference is that he spent two weeks researching in India instead of Zambia.

Our business is hot, red hot. We’ve already got traction and now we’re picking up speed.

A Year in Review

Dear all,

I would like to congratulate everyone on a year of big achievements at Mobile Transactions. Some key highlights include:

• $15.5 million in transaction value processed over our system (1,100% increase from 2009)
• 100,000 consumer money transfers
• 250,000 electronic voucher transactions across 30 districts with the World Food Programme, Food and Agriculture Organisation, and Conservation Farming Unit
• $1.7 million of Dunavant cotton farmer payments
• $500,000 in unbanked microfinance loan disbursements paid out through our agents
• $1.5 million in banked payments
• 9 Champion Agents successfully launched
• 272 active agents (up from 69 at the end of December 2009)
• Successful launch of our supplier payments product with two milling companies and a dozen retail agents
• Translation of our voucher system into Portuguese for roll-out with WFP Mozambique

These achievements should be celebrated as they did not come easily. It took a tremendous amount of hard work from everyone on the Mobile Transactions team in the face of adversity and very limited cash flow.

In addition, we added key members of our team over the course of 2010, including Keith Davies (Operations and Finance), Hans Hesse (Vouchers and IT Integration), Jon-David Steffen (IT Developer), Dave Vosburg (Finance), Bronwyn Baker (Financial Analyst), Hope Okoronkwo (Bulk Payments), Gertrude Makando (Supplier Payments), Tasira Nkhata (Customer Care), Michael Bwalya (Agents), Chris Mwaba (Vouchers) and Patrina Mwila (Admin).

Sadly, Claudius Fundi, one of our first employees, will be moving on in the new year. We wish Claudius all the best as he tackles the next challenge and the Mobile Transactions door will always be open.

We also received some great consultancy work, starting with Leanne Viviers, an Oxford MBA graduate who stayed on after a 2 month pro-bono consultancy by a team of 4 Oxford students (Santiago Alvarez, Natalie Miller, and Simon Jebreel). Engineers Without Borders Canada contributed a volunteer, Ben Campbell, to lead our Dunavant farmer payments project based out in Katete, Grassroots Business Fund pitched in with Sarah Taylor (legal), and PROFIT funded a regulatory consultant (Loretta Michaels). All of these individuals and organisational partnerships have added tremendous value to our business.

Finally, I would personally like to thank John Schroeder and Christine Phillpotts (GBF) for spearheading our advisory board, and Patrick Pichette for the personal mentorship and support. We are very humbled at Mobile Transactions to have such a great network to fall back on.

I am very confident 2011 will be a break-out year for Mobile Transactions. As the World Food Programme winds down their e-voucher project in January as part of their normal funding cycle we will focus on filling the gap with a boost in transaction volume from our very promising supplier payment product. Thulasy Balasubramaniam will be re-joining us to manage our Supplier Payments division, and there couldn't be a better person at a better time.

Our big target for 2011 is to close a Series A investment round to secure the necessary financial resources and investment partners to realise our full potential in Zambia and beyond. We are very excited by the interest investors have already shown, and if we can continue to grow and demonstrate our capability as a team, I have no doubt we are on the path to success.

On behalf of the Mobile Transactions team, I wish everyone the happiest of holidays and look forward to an even bigger year in 2011.

Best,

Mike Quinn

CEO

MTZL and NEXT year end highlights

1. Introduction

Next Retail Limited made a donation of US$142,600 from the sale of its "Dare To Care" cotton range to the development/marketing costs associated with Mobile Transactions Zambia Limited (MTZL) in its Rural Community Individual Transaction Accounts and Payment Accounts in rural Zambia.

The overall objective of the project is as follows:

Small scale cotton farmers in Zambia improve their livelihoods using the Mobile Transactions Payment Services and MaKwacha Account Transaction services facilitated by Mobile Transaction Agents.

To this end, MTZL has been working with Dunavant Zambia Limited to provide improved payment and transaction services to their 70,000 outgrowing cotton farmers.

Dunavant’s outgrower management system was initially developed by MTZL and is currently in use as their core agricultural management system. Within one agricultural season, the Dunavant outgrower system moved from decentralised Microsoft Access databases at each of their nine agricultural offices to a centralised web based platform hosted within their Geneva head office.

Now, these agricultural offices and rural sheds (with laptops powered by solar charged car batteries that can connect to the internet via mobile GPRS modems) can capture real time data into a centralised system.

In 2009, MTZL and Dunavant began to develop a system that interfaces with the outgrower management system to pay farmers electronically. At the end of the 2009 buying season (September to December), a trial was done with payments made to Dunavant’s distributors.

During the 2010 buying season, an MTZL team was dedicated to developing a scalable implementation model in Katete to find ways to pay Dunavant’s farmers faster using this payment system.

This report summarizes the work that was done in 2010 and describes some of the highlights.

2. Project Summary

MTZL’s farmer payment system has one overall objective: To pay farmers faster. Dunavant’s current cotton buying process is a manual one and takes a great deal of time to turn around. This process was expedited when lap-tops that are connected to Dunavant’s central database were introduced in the field, allowing farmers to be paid in as little as three days. However, this is still far too long for most farmers to wait, for reasons that are described below. In a competitive season, farmers can be tempted to sell to other companies that offer on-the-spot payment.

Thus, Dunavant’s goal is to simply pay farmers faster. MTZL’s system offers two of doing this:

1. MTZL built an online payment interface that can be accessed using a mobile phone and that allows Dunavant’s paymasters to pay farmers in less than one day. Since most farmers do not have phones themselves, this is an excellent payment option. And for Dunavant, it decreases the chance for fraud.
2. MTZL also built a payment system that allows farmers with mobile phones to be paid into their MaKwacha Account the instant their Crop Receipt Voucher (CRV) is processed. Dunavant believes this is the future of farmer payment and that it benefits both the company and the farmer greatly.

These two payment options are contrasted to the current, manual process in the diagram below.

During the 2010 buying season, the MTZL team trained 6 sheds in Katete, 2 in Chipata, and an MTZL Agent in Monze to offer the online payment option. Trial payments were also made in all these locations. The system offers a drastically different way to pay farmers, thus a great deal of time and effort was spent on adapting the system for specific field realities and in communicating the change to Dunavant’s field staff. As the system is scaled up, this will remain an important part of the process.

In developing a model to implement this new system, we learned several things:

1. The process and system should be ready earlier in the year, as during the buying season (April to August), Dunavant staff and farmers are incredibly busy.

2. The field-based accountants require a great deal of technical support in adopting the new system thus resources should be allocated to this during scale-up.

3. The main lag in time is in collecting the CRV’s from the buyers and verifying them at the shed. During the 2010 season, many Shed Area Managers (SAMs) spent a great deal of time on this. Since they are responsible for other duties as well, it may be wise to develop an alternative method for collection.

4. The more competitive the area, the harder it is to adopt this system. People have less time to learn how to use a new system when there is cotton that needs to be bought and transported. In less competitive areas like Monze, the payment system was easy to use and staff were quick to learn. In either case, the earlier staff gets training, the better.

5. Farmers are understandably mistrustful of new companies and need time

to build trust with the system. They already have a great deal of trust with Dunavant, so it was important to make sure Dunavant was at the fore and that MTZL was seen as a partner and service provider. “Dunavant Pays Farmers Fast…Powered by Mobile Transactions.”

6. In future, as described in the diagram above, it would be best if Dunavant’s buyers are made into "MaKwacha Buyers" that can use phones to pre-process payments before the CRV's are verified.

The field team also trained and advertized to several hundred farmers and other people in Katete, Chipata, and Monze. MTZL’s overall presence in rural Zambia is quite low, making the overall knowledge and trust of MTZL small as well; however, our brand credibility is spreading by word of mouth. Many people are testing the system right now by buying talk time and depositing K100,000 (£14)into MaKwacha Accounts and withdrawing small amounts to make sure it works properly.

MTZL Agents connect the end users – the farmers – to the system we’ve described above. In developing an implementation model in Katete, we learned that there is a need for three kinds of Agents:

1. The Champion Agent – the Champion Agent is a franchised operator of MTZL and offers all of MTZL’s products and services. By working directly with Dunavant, the champaion becomes a guaranteed point of service for Dunavant’s farmers and casual workers for withdrawing or depositing money from and to their MaKwacha Accounts.

2. Sheds as Agents – Dunavant’s sheds are distributed deep in Zambia’s rural areas and can reach customers than no other Agent can. Therefore, the team trained the SAMs – who essentially manage the business – and stocks clerks at each shed in Katete and Chipata to act as MTZL Agents. Now, eight sheds are successfully operating as Agents, four in Katete region and four in Chipata region.

The SAMs are willing and proud the support the sheds as Agents because they feel it increases face time with their farmers, builds “field presence”, relationships and trust, and does not pose a hindrance to their work.

At the sheds, farmers have a reliable way to save money (instead of buying animals as savings) for essential farming costs (e.g., planting and weeding). Farmers, and not just Dunavant’s, are also coming into sheds to receive money (before the marketing season) and send it (during the marketing season).

3. Schools and Co-operatives – The field team’s first objective in setting up Agents was to “follow the money”, to see where and what farmers spend their money on. There were two overwhelming responses: Farmers spend money on school fees and fertilizers.

Accordingly, the team approached schools in Katete to see if they would receive payment using MTZL’s system and offer other products and services as an Agent. The team set up 3 schools as Agnets, two in Katete and one in Msoro.

The remotest boarding school is now a high performing Agent. Boarding schools, especially remote ones, have the biggest incentive to be Agents and the most resources making them the best Agents.

The team also approached several local farmers‘ co-operatives, as farmers are able to access subsidized fertilizer through membership in them. Co-operatives use the Agents to deposit money into their bank account. The season for fertilizer purchases has not yet come, but we are keen to see how this will pan out.

As it stands now, engaging schools and co-operatives to offer MTZL’s services allows both MTZL and Dunavant to build relationships with farmers, which is an invaluable asset in Zambia. It also is a great way to attract other rural customers for MTZL because these are institutions which people can trust.

3. Highlights

A farmer in Msoro used to ride his bike 6-8hrs round trip to pay his school fees, but now he can just send them from Dunavant’s Msoro shed. Boniface Mwale used to travel to Petauke to pay his K150,000 (£20) school fees, spending K150,000 on transport along the way, but now he can send money to his child for a K8,000 (£1) fee.

Charity Tembo (Below) is not with Dunavant but still deposited k900,000 (£120) into a MaKwacha account for safekeeping after selling a bull. She withdrew half to buy a calf and pay school fees 3 months later. Ganizani Chilumbu (left) is a 22 year old farmer/buyer who is using his MaKwacha account to save for his future.

In July 2010, Bernice Leppard (left)) and Pamela Batty (Right) of NEXT Retail Limited visited the project.

Making IT happen

Before I start let me introduce myself. My name is Brett Magrath and I am one of the co-founders of Mobile Transactions. Today my position is Chief Technology Officer as well as being part of the senior management team focused on the strategic direction of the business and general management. As the last member of the senior management team to post a blog the pressure is definitely on and hopefully I can provide some interesting insights into what is definitely an interesting industry.

Within this blog I am going to provide some thoughts into the following:

1. M-Pesa – The industry leader causing a confusing theoretical standard
2. So where did our strategy and IT approach come from
3. Find a source and follow it…as many times as possible
4. Where to from here

M-PESA: THE INDUSTRY LEADER CAUSING A CONFUSING THEORETICAL STANDARD

The question around how do you compare to M-Pesa always comes up and therefore I thought before jumping into too much around Mobile Transactions that there would be value in making a few comments on M-Pesa. Firstly, the success of M-Pesa has been amazing and I am in awe of what has been achieved. This said before anyone considers trying to “copy” M-Pesa or believe that their strategy should be the industry standard it is important to assess some of the reasons for the M-Pesa success.

There a probably a million articles on this on the web and the below certainly does not catch them all, but my opinion is that the below are the key components:

1. The Kenyan people
2. Full buy-in from senior management
3. Understanding that mobile money is a service rather then a product
4. A strong and trusted brand
5. The market share of Safaricom
6. Initial donor support
7. Management team

These dynamics make for a challenging or near impossible industry standard to try and replicate.

Having been educated in South Africa, rugby is in my blood and I love watching rugby and any sport for that matter. The reality though is that my playing days are long gone and I have settled in nicely to the world of the armchair critic. As an industry mobile money is still very young. The potential mobile money has in terms of social and economic returns are great, but one down side of this is it has lead to a large number of very inexperienced purely theoretical based armchair critics.

My concern is that this combination of the massive success of M-Pesa with the large number of theorists commenting or driving the industry direction is leading to a situation where much of the most creative and real value added services are not being focused on as many people have been brainwashed into believing the only route to success in mobile money is following or trying to be an M-Pesa.

As more and more solutions and models are implemented and more in field knowledge of different models come to life this mindset with start to shift. The challenge will be for those supporting or investing in this space and companies like Mobile Transactions who are involved in implementing services to always reference the successes achieved in other markets, but to focus on building strategies and business plans applicable to what their markets are telling them.

From the Mobile Transactions perspective our views on this remain as they have from day one. Don’t over complicate the strategy, listen to the market, understand the needs of the market and build solutions that meet these needs, then listen and learn some more to evolve and improve our product offering and importantly make sure it is the correct offering. The approach has always been a simple one and one you can only learn from implementation. I would strongly recommend any company looking to launch within this sector to understand what M-Pesa has achieved, but to build a model that is based on market requirements not the M-Pesa effect.

SO WHERE DID THE STRATEGY AND IT APPROACH COME FROM

BANGLADESH NOVEMBER 2004

My original experiences in mobile money started in Bangladesh in November 2004. At the time we were involved in a project to implement a SMS based electronic airtime distribution system. We had implemented the system in a few African markets and through a connection to Telekom Malaysia via Telekom Networks

Malawi we ended up doing a deal with Aktel a mobile network in Bangladesh. The characteristics of the African airtime market were characterised by a network, a super dealer, a sub dealer and then the client. The difference in

In essence we build a money transfer service where the sole purpose of the solution was to sell airtime. The main take out of this for me was the amazing potential a market like Bangladesh has. Within a few months the system was processing 500,000 airtime sales per day.

ZAMBIA PILOT JULY 2007

From Bangladesh it was back to Zambia where we were approached by PROFIT a USAID funded organisation to implement an electronic payment system to pay rural cotton farmers in July 2007. Instead of spending time and effort trying to build a system to do this we utilised the same SMS based airtime system from Bangladesh. Yes SMS is not overly secure, but for a pilot in the far Eastern parts of Zambia it worked perfectly and provided a bunch of insights in terms of where we needed to take our technology and the kinds of services we needed to offer. Some of the key findings were linked to providing the ability for Money Transfers whereby employees working in the areas near the ginneries were able to transfer funds to their family back home. Based on this we developed our money transfer service which has growth successfully since the commercial launch last year. Other developments obviously included moving away from unsecured SMS to now offer a Mobile and PC based Internet interface, Java mobile application and soon to be implemented USSD interface.

COMMERCIAL LAUNCH MARCH 2009

Based on the success of the pilot and the progress being made with the Money Transfer service PROFIT again approached Mobile Transactions with the dynamic of the Zambian fertilizer support programme. This is an existing government programme that distributes fertilizer support to rural farmers. Again the IT approach was driven by a business / market requirement and the solution to how best to support this is what has today become our successful voucher solution. Any IT solution we provide we try to make it as generic as possible to support multiple industries and multiple uses. With the voucher product we achieved this and we were able to very quickly launch a slightly adjusted version of the fertilizer solution for the World Food Programme. Last month we handled nearly 40k vouchers and transacted over $1.4m dollars in value.

To summarise our IT approach to date it has been built on the following foundations:

1. Listen to the market and develop solutions to requirements
2. Solutions win the day not technology – don’t over engineer the solution or put too much effort into the solution until you know it is the correct one
3. There must be an IT vision for scalability, but vital this is always kept in check with the realities of what is happening on the ground and relevant to the market

FIND THE SOURCE AND FOLLOW IT…AS MANY TIMES AS POSSIBLE

MONEY TRANSFERS

Core to the success of any mobile money business is getting electronic funds into the system.

For M-Pesa this source is agents putting cash into electronic and then individual customers doing cash deposits to get this electronic and then transacting off this. For Mobile Transactions when we launched our core product was our agent to agent money transfer service. The source was similar to M-Pesa in that it first came from the agents, was transferred to the money transfer then moved to the agent who did a send to bank and the electronic was gone.

There were a few issues with this:

1. Getting the source from the agents is difficult – For a new company providing a new service to get agents to put funds into a product that is not their core business is a challenge and although something we achieved it took a lot more time and effort then we imagined. I think even for networks they will find this more of a challenge then they expect.
2. Once we had created this the product we were offering meant the source came in was transacted as a money transfer and then quickly moved out.
3. Because the source came from the agents the working capital amount of this source was not sufficient to add additional transactions and products to this amount
4. The source was a value added service to the agent so the amount of working capital they invested was always competing against the working capital the agents invested in their core business offering

VOUCHERS

Once our voucher system was launched we were able to create a new source. This time it came from the voucher project companies who put in funds to distribute vouchers. The dynamics of this electronic source was very different:

1. The electronic put into the system was towards their core business or strategy or distributing vouchers
2. The source was being used to add real value to this core business
3. The working capital of this source was enough to look to start to add new products that transacted of the original electronic source therefore increasing the number of times we could transact on the source
4. The voucher source created a pool of electronic at our agents through the agents selling products that were core to their business

BULK PAYMENTS

What was also interesting is our next product we launched was our bulk payment solution whereby companies could pay both banked and unbanked customers via our system. I am going to focus this discussion on the banked side rather then the unbanked as they has different dynamics. On the banked side there is a market inefficiency whereby cross bank transactions are very expensive and our strategy was to offer a lower cost bank payment solution to any bank at one lower rate whereby we then switch between the different banks. Logical yes, but the issue is we needed to create a new source of electronic. Referencing the points above we were trying to create a new source that did not add real value to the companies core business and the real benefit was a cost saving. As we have taken the product to market we have learnt similar lessons to our money transfer product in that getting this source into the system is often more of a challenge then expected. And again once the source is in if it is used for banked payments is departs very quickly. Again similar to our agent to agent money transfers service. Like money transfers I am fully confident that our bulk payment product will turn the corner and achieve the growth we have seen in our other products, but the error we made was focusing on a new source rather then following an existing source.

ORDERING

So with lessons learnt about following the source in early December we will be launching our latest product called our ordering system. The beauty of this product is we are not creating an electronic source as it already exists. Our voucher agents have electronic funds and they have a need for an improved and more efficient ordering process from suppliers. The suppliers too have a need for a more efficient ordering system meaning we are offering a product that adds real value to the company’s core business and we are following the source of the electronic funds we are creating and facilitating multiple transactions off the original source.

What will be interesting to follow is that as we get this electronic to move from the agent to the supplier will our bulk payment solution become more desirable once we have overcome the core challenge of getting in the electronic source.

WHERE TO FROM HERE

In any new industry to make any widespread comments about where Mobile Transactions will go is a bit of an unknown.

What I can say is that the direction will we go will be focussed on a few keys areas:

1. Listening to our customers and markets and taking our solutions towards the direction the feedback we get wants to take us
2. As we grow as an organisation be in the more privileged position where we can start to analysis the directions we are drawn into to determine which are the best routes for our company

The other component I would add into this is that although the current strategy focuses on following the source and transacting off this I believe future strategies will evolve that focus on analysing the data that we are obtaining. I don’t understand the Micro Finance sector, but I find it fascinating how an industry can boasts about a +97% repayment on loans when the interest rates they are charging are so high. I understand there are large costs involved, what I don’t understand is why they are needed. Is it a lack of financial transaction knowledge of the customers to make sound lending decisions or is it a lack of a low cost payment and repayment solution. As highlighted this lending space is a big unknown to me, but something I look forward to applying my mind to in the future but I guess if I fall back on what I have written in this blog only when the market pulls me into this direction.