M-Pesa top ups rub distributors the wrong way

Safaricom on the other hand is making huge savings on scratch card printing costs, distribution and commissions paid to retailers. Depending on how things work out, the growth of this retail avenue may spell the death nail to the traditional system that has been a source of earnings to thousands of distributors.

New revenue streams
The firm has been exploiting additional revenue streams and saving mechanisms with vigour due to dwindling fortunes for the industry from voice market and hence the motivation to reduce the manual based processes.

And many subscribers are being converted into the paperless world of airtime top ups through M-Pesa, with the huge bonuses on airtime purchased on the money transfer service being a significant motivating factor.

The firm ordinarily offers 10 per cent more airtime to subscribers topping up using the money transfer service but at times as much as 50 per cent, making it difficult for subscribers to resist.

New provisions
Both dealers – who are exclusive to Safaricom – and retailers say should the company go ahead and pursue the new airtime retail business model, it would eventually drive traffic from their shops. They now want Safaricom to make provisions allowing them to make commissions on the services paid for using M-Pesa.

Other than airtime purchase, other services paid for using M-Pesa include shopping and paying for utility bills.
Safaricom’s distribution network that is anchored on exclusivity with dealers and some large retailers has been key to its success as they ensured the operator’s products got to the market on time.

The new distribution approach has left some of the ‘partners’ on the ground disgruntled but some argue that the company still needed a good retail network in the market for continued success of its M-Pesa and other products.

Safaricom said it would pursue selling airtime through the money transfer service and maintained that its retail partners were not losing out because most of them double up as M-Pesa agents and would continue to get revenues from M-Pesa deposits and withdrawals that are expected to continue growing.

“The M-Pesa airtime top up does not negatively impact on our airtime dealers’ overall earnings, since all our airtime dealers are also M-Pesa dealers and as such they stand to gain from continued uptake of the service,” said a Safaricom in a statement responding to our query.

“Over the next few years Safaricom will increase its usage of paperless, more eco-friendly operational strategies as a conscious effort of reducing the negative impact on the environment.”

Safaricom airtime dealers who declined to be named for fear of victimisation, however, are not of the same opinion. They contend that if anything, the increased traffic on M-Pesa transactions would with time drive some of them out of business.

Negative impact
Ben Muchemi chairman Safaricom Dealers Association said the move by Safaricom would have a huge negative impact on the dealers as well as the hundreds of thousands of people working in retail outlets, whose earnings are pegged on the commissions paid for airtime sales.

“People are opting to use M-Pesa to top up airtime because it is convenient and at the moment they are getting more airtime because of the 10 per cent discount. It is a method that most retail outlets cannot compete with,” he told The Standard On Sunday in an interview.

“The distribution that the company took up when it started has had a huge impact in terms of job creation.”

Muchemi reckons that the association is negotiating with the company on the issue adding that “they have an understanding chief executive (Mr Bob Collymore) and we are expecting to meet somewhere in the middle”.

“Dealers have been central in growing Safaricom and they should not be punished because of their success or making Safaricom successful.”

The chairman of the dealer’s association did not disclose any proposals the dealers have made to the company during their negotiations and is even modest about the role dealers have played in growing Safaricom, other players along the value chain are not.

Retailers, a significant number of whom double up as M-Pesa agents, note that they have been core to the success of Safaricom and are hoping that they too should get a commission every time a subscriber makes a transaction on M-Pesa.

A manager at a Safaricom branded shop in Nairobi’s Central Business District noted the distribution network that Safaricom built in its formative years has been critical in the rise of the firm to being one of the largest and most profitable in the region.

“The fact that one could access scratch cards even in remote areas made Safaricom a successful company. The continued success of the business depends heavily on the relations the firm has with its partners on the ground,” said the manager who spoke on condition of anonymity.

“Currently the agents only get a commission when a subscriber deposits or withdraws money. They now want commissions on every other transaction that subscribers make using M-Pesa, including airtime tops or paying for shopping or utility bills.