Safaricom M-PESA Results FY 2021, A Story of Network Effects.

courtesy: Unsplash

Safaricom released its results for the year ended 31st March 2021 on 13th May 2021, and the results are impressive. The M-PESA business held its revenue generation power despite COVID 19 headwinds.

I will attempt to look at the M-PESA numbers using a networks effects context to uncover the M-PESA moat and endeavour to get insights into M-PESA's core utility 14 years after launch.

I have written about Safaricom network effects before. Please find the article here.

The M-PESA Network Is A Moat To Safaricom’s GSM Business.

M-PESA has become as important as the voice business from a revenue generation perspective. M-PESA generated Ksh 82,647.4Bn or $ 771.32 Mn, the Voice business generated revenues of Ksh 82,552Bn or $ 770.4Mn. (1 Usd = 107.15 Ksh.). M-PESA’s contribution is 34% of total Mobile Services Revenue, which stood at KSh 240,844.6Bn or $2.247Bn. (1 Usd = 107.15 Ksh.)

Safaricom FY 2021 results

Maintaining The Moat Is an Expensive Affair only Safaricom can Afford.

M-PESA is a significant moat to Safaricom's business model. The revenue numbers demonstrate this without a doubt. M-PESA provides a direct personal network that sits on the physical direct GSM network, creating a dense network of nodes that keeps customers locked in.

It, therefore, makes sense for Safaricom to continue operating the network despite M-PESA being margin dilutive. It costs Safaricom more than three times to manage the M-PESA business than other businesses. See below.

Safaricom Direct Costs FY 2021

35% of the Ksh 80,015.1 Bn or ($ 746Mn) of direct costs are attributed to M-PESA as agent commissions. At the Gross margin level, without customer acquisition and retention costs, M-PESA made Ksh 54,441.8Bn ($508Mn), a 66% margin contribution.

This is the cost of running one of the most defensible moats the world has seen.

Agency Distribution Is A Double-Edged Sword.

High Cost of Agency Distribution.

The agent distribution network cost Safaricom an eye-watering Ksh 28,205.6Bn ($263Mn) to maintain in FY 2021. This distribution network, In my analysis, is the lifeblood of the M-PESA.

At the core of the M-PESA business model are three transactions, Deposit transaction, P2P transaction and the Withdrawal transaction. These transactions are the table stakes.

Safaricom FY 2021 results

In FY 2021, Deposits processed by Agents were Ksh 3,766Bn or ($ 35,1Bn). Withdrawals processed over the same period were Ksh 2,046bn or ($19Bn). We all know to get from Deposit to Withdrawal, one has to send money through P2P. The P2P value processed for FY 2021 was Ksh 3,612Bn or ($33.8Bn).

How This Spend On Agent Distribution Turns Into a Moat For M-PESA.

Agents are loyal and sticky to M-PESA because they make money. On average, in FY 2021, a Safaricom Agent earned Ksh 114,192.17 ($ 1,065.73). The agent earnings work out to Ksh 9,516.06 ($ 88.1) per month. Most Agents consider this revenue stream an important complement to their businesses.

An agent will only invest their float in a network that has transactions. Safaricom solves the chicken and egg problem by investing heavily in Agency distribution.

Number of M-PESA Active agents

Lipa Na M-PESA — Is not a lucrative venture, Or is It?

The Lipa Na M-PESA business is a Two-sided Market Network that facilitates payments between buyers (Consumers on the Mobile Money Network) and Sellers (On the Lipa Na M-PESA Network). I discuss these concepts in my blog,

A two-sided market network is not as powerful as a direct Physical network like the GSM network or the direct Personal Utility network like the P2P M-PESA network. The diagram below from the NFX team shows a map of networks based on their power.

NFX network effects map

This dimmed performance of Lipa Na M-PESA can be contrasted to the robust revenue performance of P2P, B2B, B2C and C2B payments. A quick reconciliation of the total M-PESA revenue numbers to include P2P and Withdrawal brings out the picture below.

Analysis of M-PESA Revenue to Include P2P and Withdrawal Revenue

P2P, Withdrawal contributed 29% and 38% of total M-PESA revenue respectively whilst Payments revenue contributed 21 % of total M-PESA revenue. Below is the breakdown of Payments revenue which includes C2B, B2C, B2B Lipa Na M-PESA and Betting.

M-PESA payments FY 2021 performance

C2B, B2C, B2B, Lipa Na M-PESA and Betting contributed a total of Ksh 16.97Bn of revenue in FY 2021. Lipa Na M-PESA brought in the lowest revenue of the bunch at Ksh 2.68Bn ($25M), which is 16% of total Payments revenue.

Lipa Na M-PESA — The Case of Flies and Mice.

Lipa Na M-PESA is focused on a very price-sensitive market. Safaricom captures 1% of the processed value on average. It's apparent that M-PESA does not have pricing power in this segment.

Lipa Na M-PESA Gross Margin Contribution Must Be Terrible!

One wonders what it costs Safaricom to execute extensive customer acquisition and retention strategy in such a value constrained segment. Of note is that M-PESA runs one of the biggest Merchant networks in Kenya, with 509K merchant Tills acquired and 302K monthly active merchants. See below.

M-PESA payments FY 2021 performance

Why is the Lipa Na M-PESA network valuable?

The only way I see the maintenance of the Merchant network is the role it plays in reinforcing the M-PESA network. The more nodes you have on the network, the more valuable the network becomes. As such, all the businesses on the M-PESA network reinforce each other. This is a key tenet of Metcalfe’s law. See below


Banks Supporting The M-PESA Network.

C2B and B2C transactions contributed a total of Ksh 9.96Bn, 59% of total payments revenue. Safaricom has been able to extract a lot of value from Banks through these transactions.

Safaricom has indicated that Banks largely drive B2C and C2B transactions. See below.

M-PESA payments FY 2021 performance

Is P2P the Core of M-PESA After 14 Years? and Is Cash Still King??

This analysis shows that most people deposit money to the M-PESA wallet through Agents and Banks to send money through P2P.

P2P and withdrawal transactions generate 67% of M-PESA revenue. This also means Cash Is still KING!!!!!




These are my humble observations, and I leave the door open to the fact that I could be totally wrong about different aspects of the Safaricom M-PESA business model. Let me know what you think about M-PESA FY 2021 performance and what your unique insights are.

The opinions presented here are strictly my own and do not represent those of my employer.



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