20
thousandsofM‐PESAstoresspreadacrossabroadgeography.Toachievethis,Safaricombuiltfour
elementsintoitschannelmanagementexecutionstrategy:(i)engaginginterm ediariestohelpmanage
theindividualstores,therebyreducingthenumberofdirectcontactsithadtodealwith;(ii)ensuring
thatoutletsweresufficientlyincentivized
toactivelypromotetheservice;(iii)maintainingtightcontrol
overthecustomerexperience;and(iv)developing severaldifferentmethodsforstorestore‐balance
theirstocksofcashande‐value.
Two‐tierchannelmanagementstructure.Safaricomcreatedatwo‐tierstructurewithindividualstores
(sub‐agents,inSafaricom’sparlance)
whodependedonmasteragents(referredtobySafaricomas
AgentHeadOffices[HO]).AgentHOsmaintainallcontactwithSafaricom,andperformtwokey
functions:(i)liquiditymanagement(buyingandsellingM‐PESAbalancefromSafaricomandmakingit
availabletoindividualstoresundertheirresponsibility),and(ii)distributingagent
commissions
(collectingthecommissionfromSafaricombasedontheoverallperformanceofthestoresunderthem
andremuneratingeachstore).IndividualstoresmaybedirectlyownedbyanagentHOormaybe
workingforoneundercontract.
Incentivizingstores.Retailoutletswillnotmaintainsufficientstocksofcashand
e‐moneyunlessthey
areadequatelycompensatedfordoingso.Hence,SafaricompayscommissionstoagentHOsforeach
cash‐in/cash‐outtransactionconductedbystoresundertheirresponsibility.Safaricomdoesnot
prescribethecommissionsplitbetweenagentHOsandstores,thoughmostagentHOspasson70
percentofcommissions
tothestore.
24
FordepositsunderUS$33,SafaricompaysUS13.3¢intotal
commissions,ofwhichUS7.4¢goestothestoreaftertax.Forwithdrawals,SafaricompaysUS20¢to
thechannel,ofwhichUS11.1¢goestothestore.So,assumingequalvolumesofdeposits and
withdrawals,thestoreearns
US9.2¢pertransaction.Assumingthestoreconducts60transactionsper
day,itearnsaroundUS$5.50–almosttwicetheprevailingdailywageforaclerkinKenya.
RecallthatSafaricomchargescustomersUS33.3¢onaround‐tripsavingstransaction(freedepositplus
US33.3¢withdrawal),whichisin
factequaltowhatthechannelgets(US13.3¢onthedeposit+US20¢
onthewithdrawal).So,assumingequalvolumesofdepositsandwithdrawals,Safaricomdoesn’tmake
anymoneyoncashtransactions.Itmerely“advances”commissionstothechannelwhencustomers
deposit,andrecoupsitwhencustomerswithdraw.
BychargingUS40¢onelectronicP2Ptransactions
(whicharealmostcostlesstoprovide),Safaricomoptedtogeneratethebulkofitsrevenuefromthe
serviceforwhichthereishighestcustomerwillingnesstopay‐remoteP2Ppayments.
Becausestorerevenuesaredependentonthenumberoftransactionstheyfaci litate,Safaricom
was
carefulnottofloodthemarketwithtoomanyoutlets,lestitdepressthenumberofcustomers per
agent.Instead,itmaintainedabalancedgrowthinthenumberofoutletsrelativetothenumberof
activecustomers,resultinginanincentivizedandcommittedagentbase.
Maintainingtightcontrolover
thecustomerexperience.Safaricomalsorecognizedthatcustomers
needtohaveagoodexperienceattheretailpoints,wherethebulkoftransactionstakeplace.Toensure
thatitmaintainedcontroloverthecustomerexperience,Safaricomdidnotrelyonthebroadbaseof
24
Safaricomwantsthesplittobe20%/80%,thuspassingmoreofthecommissiondowntotheretailoutlet.