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Global transfers: M-Pesa and intellectual property rights

In July 2020, in the midst of the COVID-19 crisis, Kenyan mobile operator Safaricom announced a significant event – the intellectual property rights (IPR) for the mobile money service M-Pesa was finally “moving back into African control”. For this, it paid a sum of £7m to its UK-based parent company Vodafone.

The announcement didn’t receive much commentary at the time, but it raises a number of critical questions – Who controls the IPR of M-Pesa? Wasn’t M-Pesa created in Kenya, so why did Safaricom need to buy the IPR?

IPR is a key source of economic power, and global rules have been argued to support the dominance of firms from the global north [1]. Further understanding, however, is required with the expansion of digital economy in the global south. How does IPR relate to the expansion of digital firms when it is fundamental to competitive advantage [2]?

The case of M-Pesa can provide a useful perspective on these issues. M-Pesa should be seen as a global innovation associated with a large multinational (Vodafone Group) with control of a set of mobile operators around the globe. M-Pesa has been part of services in locations such as Egypt, Ghana, South Africa and India (with varying success).

M-Pesa while created in Kenya should be considered a global innovation. This includes multiple implementations linked to Vodafone Group, and with a range of IPR assets

Innovation in M-Pesa and IPR

A first step to understanding M-Pesa IPR is to examine who was involved in creating the service. The core of M-Pesa emerged in 2007 as a small development project through DFID, the UK development agency, in a fund that supported private sector involvement. Financing was shared between DFID and the Vodafone Group.

Safaricom also played an important role through technical and operational support as M-Pesa emerged during a pilot study in Kenya as part of the project. We should also not underplay a broad range of actors involved in shaping innovative aspects of M-Pesa. This includes informal innovation in Kenya around the use of mobiles that pre-dates M-Pesa and the role of users and agents during early stages.

M-Pesa IPR includes software, patents and branding. Examining the documentation associated with the IPR, we see the shadows of these diverse contributions to innovation. But when it comes to assigning rights, diverse actors reduce. For example, of 10 patents filed, principal authors are largely made up of UK-based researchers in Vodafone. A more detailed analysis of such patents, however, shows that some relate to local creative practices occurring in Kenya, where patents formalise previous informal activities through describing software systems.

A crucial moment around IPR in M-Pesa was how the initial development project treated IPR issues. Evaluation documents indicate that with low expectation of innovation, “intellectual property rights were..not adequately considered in the design process. As many proposals involve customised ICT development, this poses a serious problem” [3]. There is little indication that DFID sought to gain any rights, to ensure development goals were considered going forward, or how Vodafone Group dealt with IPR linked to its subsidiaries.

So what?

Ownership of IPR in M-Pesa has been central to control of the service. Firstly, it can be linked with significant transfers. As well as the fee paid to take back the IPR in 2020, Safaricom have paid an annual “service fee” to the parent Vodafone for use of the M-Pesa service (and IPR). This has resulted in the estimated transfer of €170m between 2010-2019.

Secondly, in Kenya, IPR control has led to significant tensions around innovation. After its initial successes, those involved with M-Pesa in Kenya often express frustration – with slow upgrades, with limited interaction with financial ecosystems, and with restricted innovation in new products. One key reason for this voiced by managers is that Safaricom faces challenges around control, citing the way that the software and IPR is controlled by Vodafone from the UK, who may have different priorities to Safaricom.

Challenges of IPR in the digital economy

Even though M-Pesa is a unique case, it provides insights on IPR and global digital innovations:

  • Diverse actors involved in innovation become narrowed when it comes to IPR. In M-Pesa, it was mainly actors in the UK who filed patents or wrote the code.
  • Socially-orientated funders are often a part of innovation but may pay scant attention to IPR issues (due to time, focus, skills, corporate pressure) with long-term outcomes.
  • When digital technologies are embedded in the global south, there are underplayed ethical challenges in how local knowledge and practices become embedded within IPR.

IPR is rarely explored as part of research around digital development. But as this case shows, engagement is vital.

The creation, use and adoption of digital technologies offer important new resources in driving development, but without due attention to IPR issues, longer term challenges and injustices can arise.

This article summarises a recent short paper “Global Transfers: M-Pesa, Intellectual Property Rights and Digital innovation” presented at IFIP 9.4 online conference 2021. Full paper available on arXiv

Notes

[1] For critical discussion, see Chang, H.-J. (2001) Intellectual Property Rights and Economic Development: Historical Lessons and Emerging Issues. Journal of Human Development, 2(2), pp. 287–309; Stiglitz, J.E. (2014) Intellectual Property Rights, the Pool of Knowledge, and Innovation, Working Paper, 20014, National Bureau of Economic Research, Cambridge, MA.

[2] Haskel, J. & Westlake, S. (2017) Capitalism without Capital: The Rise of the Intangible Economy. Princeton University Press, Princeton, New Jersey.

[3] Ebony Consulting. (2003). Financial Deepening Challenge Fund: Mid Term Review. Ebony Consulting International Ltd.

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