The stage is set for a no-holds-barred war for Kenya’s $292 million mobile money transfer business after regulators ruled that overlay SIM cards can be used to deliver banking and other solutions on a one-year pilot basis.
The ruling opens the door for East Africa’s largest bank by customer base, Equity Bank, to pit its wits against the country’s largest mobile network operator, Safaricom, which controls 80 per cent of the money transferred via phone handsets.
The Communications Authority of Kenya and Central Bank of Kenya said in a joint statement on Monday that the thin SIM technology to be used by Equity’s subsidiary, Finserve, met the minimum safeguards for rollout of value added solutions.
“Finserve is much more interested in value added services provided by the new SIM,” argues Tom Makau, an ICT professional. “It intends to roll out mobile banking and money transfer services that will be in direct competition to Safaricom’s M-Pesa and M-Shwari services.”
Mr Makau added that the Skinny SIM — another SIM stuck on the ordinary one — would help Finserve to circumvent subscriber attachment to their original SIM cards and dilute loyalty to M-Pesa, which was a key reason for failure of number portability in Kenya.
“If the Finserve plan goes through, Safaricom stands to lose a substantial share of the market to Finserve,” he said.
An indication of the anticipated rivalry came in April when Equity announced the acquisition of an MVNO licence with a pledge that it would charge a maximum of $0.28 for money transfers, about a fifth of the maximum charge of $1.22 that M-Pesa charges.
James Mwangi, the Equity Bank Chief Executive Officer, said at the launch of the bank’s MVNO strategy that Finserve had its sights trained on the cash transactions, which constitute 96 per cent of payments in Kenya.
“Mobile transfers will be charged at one per cent of the transaction value, compared with the prevailing market charges of 16 per cent,” Mr Mwangi said then. “The charges will be capped at Ksh25 ($0.28) per transaction.”
Equity says the move into the new territory will help the bank to drive its margins without disagreements over profit sharing which saw M-Kesho, a product launched with Safaricom, fail to take off. The giant mobile telephony service provider would later launch M-Shwari in collaboration with Commercial Bank of Africa (CBA).
Last month, Safaricom slashed its M-Pesa transfer charges by up to 67 per cent for amounts below $16 but raised the cost of sending higher amounts.
Whereas it previously cost Ksh125 ($1.4) to send Ksh70,000 ($785) via M-Pesa, it will now cost Ksh110 ($1.26). The telco said the review was based on usage data, which showed that more than 65 per cent of all M-Pesa person-to-person transactions fell below $16.
“It is our belief that by lowering the cost of these transactions we will provide an increased number of Kenyans with affordable access to basic financial services,” said Safaricom CEO Bob Collymore.
Additional solutions
Riding on Airtel’s network, Finserve will enable Equity customers and other subscribers to enjoy all services on their preferred network while additional solutions on the sticker SIM make price and quality the key factors of who wins the battle. More than half of Equity’s 8.7 million-plus bank accounts are in Kenya. The bank also has presence in South Sudan, Rwanda, Uganda and Tanzania.
Kenya’s multimillion-dollar mobile money market has also seen local banks develop independent platforms. Co-operative Bank recently launched M-Co-op Cash, a platform that offers small loans, account opening, utility payments, airtime top-up and cash withdrawal services through mobile phones.
The product is a direct competitor to M-Shwari, which is exclusive to Safaricom customers.
“M-Co-op Cash will also enable users to transfer funds across banks, micro-finance institutions and mobile networks and thereby deliver a greatly improved service experience to users,” said Gideon Muriuki, the Co-op Bank CEO.
Banks also see mobile banking as a cheaper way of mobilising deposits. For example, CBA said earlier this year that M-Shwari receives an average of Ksh200 million ($2.2 million) in deposits from customers per day. As at February, customer deposits on M-Pesa totalled Ksh24 billion ($269 million); meaning that, were the platform a bank, it would be the 18th largest by deposits.
M-Shwari, which reached six million accounts by February, handles 50,000 transactions a day. CBA also said it disbursed more than 30,000 loans to M-Shwari users per day in 2013, totalling Ksh7.8 billion ($87 million) that year. M-Shwari lends at a monthly interest rate of 7.5 per cent but Equity is proposing to do it at a maximum of two per cent.
The focus on the new segment by banks could also be a long-term cost-cutting strategy. Equity customers transact more through mobile banking and agents than in the banking hall while more than a third of KCB and Co-op customers prefer mobile solutions.
Access to formal banking
In the case of Equity, an own platform and network would help to raise usage of alternative customer delivery channels while, importantly, increasing penetration. For instance, 19.3 million Kenyans, or 80 per cent of the population, use M-Pesa with a significant number getting access to formal banking for the first time through the platform.
CBK statistics for the period ended 2013 showed that M-Pesa had helped to push the number of people in the formal financial fold to 83 per cent. That would drop to 25 per cent without M-Pesa, which contributes a fifth of Safaricom’s revenue.
Alternative delivery channels are emerging as key sources of transactional income. As at December, Kenya’s banking sector processed 730,000 mobile-based transactions compared with 338,000 card-based ones.
And although the amounts passed through these channels remained low with mobile-based transactions totalling Ksh1.9 billion ($21 million) and Ksh1.5 billion ($16 million) passed through cards, banks passed Ksh22 billion ($24 million) through the Kenya Electronic Payment Systems (KEPS).
The East African
No comments:
Post a Comment