Safaricom wins backing in row with rivals over sharing M-Pesa

By David Mugwe, Business Daily Africa

The Central Bank of Kenya (CBK) has warned against a proposal to harmonise money transfer systems currently offered by mobile phone operators, saying the move would kill innovation in a sector that has been a godsend to the bank’s efforts to bring more Kenyans into the formal economy.

CBK governor Njuguna Ndung’u said players in the mobile money sector should focus on increasing the number of agencies and customers they have before such a proposal to harmonise the systems be considered.

He pegged 24 million Kenyans using the systems as an acceptable threshold.

“Interoperability will help to reduce costs but if you reduce costs without following the rules of the game you will kill the innovation. There are proprietary rights that you have to respect,” said Prof Njuguna at the AITEC Banking and Mobile Money Comesa conference last Thursday.

Business Daily had a day earlier exclusively reported on a proposal presented to the Prime Minister’s office by Airtel that aimed at building a seamless money transfer platform that would allow rivals of Safaricom’s M-Pesa to merge their functions with M-Pesa.

It would mean that cash transfers could be sent between networks, as well as allow Safaricom’s rivals to use its agency network to extend their reach, a move aimed at diluting the market leader’s dominance.

Safaricom’s rivals had said that such a platform would remove the high cost that is preventing consumers from moving money across networks, but Safaricom argued that the move would infringe on its proprietary rights.

The development threatened to open a new front in the battle to win subscribers, as some service providers said the establishment of a central clearing house would offer them headroom to significantly cut costs as they had done in the calls market.

Safaricom’s rivals reckoned that a seamless platform would loosen each operator’s grip on the mobile money platform, pulling down the cost barriers and allowing free movement of money.

Though it is currently possible to send money across networks, the transfer process remains complex and costs 10 times more than the price of sending money within a network, adding new dimensions to the factors preventing consumers from changing mobile phone service providers.

Prof Ndung’u said CBK would be keen to see the number of unbanked Kenyans reduced before it can impose new regulations.

“If you do not have the numbers you cannot bring costs down. Let’s have the numbers then start debating how interoperability will reduce costs further but we should respect proprietary rights.”

He said that though the initiative would reduce costs, deposit accounts and access to financial services had grown over time because of innovation by mobile operators, agent banking and licensing of deposit taking microfinance institutions.

According to the CBK, the number of micro-accounts increased over five times to about 11.2 million last September from about 2.1 million in 2005.

In a presentation done in November, the CBK said that the number of deposit accounts had also increased to nearly 12 million from 2.55 million over the same period.

The CBK attributed the growth to reduced costs of maintaining micro accounts and introduction of innovative instruments such as mobile money transfer.

Prof Njuguna said that these numbers could improve further, a move that would see costs go down as more individuals use the existing structures.

“We have to follow the rules of the game but what we want is numbers on the table. Let’s not go for simple choices,” he said, adding that the deposit accounts could be increased to over 24 million.

M-Pesa remains a major attraction for Safaricom subscribers and is seen as one of the main reasons why consumers do not change from the network.

Safaricom has 13.5 million subscribers on the service with over 22,000 M-Pesa agents while Airtel, its main rival which operates a mobile money network dubbed Zap has about four million subscribers.

100,000 users

Orange, which runs a mobile money network dubbed Orange Money, has about 100,000 users and 1,500 agents, while Yu runs a mobile money network dubbed Yu Cash.

According to the CBK, as at the end of September last year, M-Pesa had transferred Sh68.02 billion with 28.45 million transactions since 2007.

Banks which have largely been left behind by the telecommunication firms in mobile money innovations have partnered with the providers so as to grow their customers.

CBK data shows that since the launch of a partnership between Safaricom and Equity Bank, 700,000 M-Kesho accounts had been opened as at the end of September last year with approximately Sh400 million mobilised.