As a mobile money aggregation and integration platform, we often get asked “Why don’t the parties involved simply build their own solution?”.  The shortest answer is that doing everything in house is too expensive and time-consuming.  When broken apart, though, the answer depends on the budgets, core competencies, needs, and long-term strategies of each player in the ecosystem.  Integrating microfinance and mobile money, for instance, involves active collaboration between the mobile money system(s), core banking software provider, and microfinance institution – all of which have their own incentives and strategic priorities.  

Mobile Money Systems 

Mobile operators are primarily interested in lowering customer acquisition costs, reducing churn, and increasing average revenue per user.  Consequently, they tend to view mobile money, not as a standalone business opportunity, but as a value-added service through which to encourage customer loyalty and, as a result, increase revenue from data, SMS, and voice.  

When it comes to microfinance – or financial services in general – mobile operators are immediately out of their comfort zone.  Microfinance institutions are traditionally risk averse, slow to change business and technical processes, and highly localized.  Furthermore, the microfinance industry as a whole is loosely regulated and lacks cohesive standards.  These factors raise a series of warning flags for mobile operators, which are quick to weigh the benefits of engaging microfinance institutions (e.g. an established customer base with frequent payment needs, rural distribution networks, etc.) against the high costs necessary to make an engagement work.  

Mobile operators also have the incentive to demand exclusivity, meaning a microfinance institution in, say, Tanzania would have to choose between Airtel Money, Tigo Pesa, Vodacom M-Pesa, or Zantel ZPesa instead of offering all four as payment channels.  Although exclusivity makes sense for the mobile operator, it severely diminishes the value proposition for microfinance customers, which invariably use multiple systems, live near different mobile money agents, have varying levels of network coverage, etc.  

Core Banking Software Providers

Countless core banking software (CBS) providers offer microfinance products, many of which are simply stripped-down versions of their products for commercial banks.  Prices range from free (e.g. Mifos, MostFIT, Octopus) to over US$100,000 (e.g. Bankers’ Realm, Rubikon, Temenos T24) and everything in between.  When it comes to integrating with mobile money systems, the head of one major CBS provider puts it best: “It’s a bloody distraction”. 

Ultimately, CBS providers are in the business of selling licenses on a global scale.  Their incentive is to bring on new customers and continually upgrade the systems of existing customers, not nurture relationships with mobile money providers on a country-by-country basis or build custom integrations.  

Microfinance Institutions

Faulu Kenya points to its integrations with Safaricom M-Pesa and Airtel Money in order to boast “unrivaled convenience”.  In addition to offering their customers more convenient services, microfinance institutions see mobile money as a way to lower back- and front-office costs while simultaneously increasing security and transparency.  In order to integrate one or multiple mobile money systems with their CBS, microfinance institutions can either build a solution in house, hire consultants to build the solution for them, or purchase an existing solution (see our previous post, Mobile Money in the Back-Office).  

The first option, building the solution in house, is beyond the reach of most microfinance institutions because they lack the necessary IT capacity and the social capital required to get the attention of mobile operators and CBS providers.  The second option, hiring consultants, is usually out of the question as well because consulting engagements can cost tens of thousands of dollars.  This leaves the third option, purchasing an existing solution, which is where Kopo Kopo comes in. 

Our Niche

Our job is to maintain relationships with both mobile money and CBS providers so microfinance institutions don’t have to.  Our service, a software-as-a-service platform for integrating corporate mobile money accounts with core banking or enterprise resource planning systems, enables microfinance institutions to gain the functionality they need without investing months of time and energy.  

Because we take a whole-of-system approach whereby we utilize channel partners to achieve scale, we can offer our service at a low price point – the lowest on the market.  For instance, it would take 12.5 years of using our service to pay the installation cost alone of one of our main competitors.  

We envision an East Africa where every microfinance institution, small and medium enterprise, and SACCO can afford to offer their customers the most convenient payment channels possible.  Our mission and continual motivation is to make that vision a reality.