Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Finally Competition for Safaricom Mobile Money Transfers

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Kenya: Finally Competition for Safaricom Mobile Money Transfers

Wednesday, 18 February 2009

Safaricom’s M-PESA mobile money transfer service had been a runaway success – because Safaricom has the largest subscriber base in Kenya, and because it offers a service that is much in demand. And two years after its launch, M-PESA now finally has competition as Zain launched a similar service, Zap. By Andrea Bohnstedt

It was with a two month delay that mobile operator Zain launched its mobile banking platform Zap in Kenya and Tanzania – Uganda is to follow shortly – after its aborted first attempt in November 2008. M-PESA, Safaricom’s hugely popular pioneer money transfer service, had just been cleared in a Central Bank of Kenya (CBK) probe intended to address concerns over the system’s safety, consumer protection and potential use for money laundering. Zain were expected to fulfil the same standards, and since they aim to add a host of additional functions to Zap, they now effectively resorted to a launch in phases to ensure CBK approval as they .

• Services: Zain, like Safaricom, also have a partner bank, but in addition to holding the system’s cash, Zain partner Standard Chartered offer clients the option to transfer money from their bank account into their Zap account, and then use it for mobile payments. M-PESA, in contrast, now also enable clients to make withdrawals from ATMs in the PesaPoint network. These two features are currently the main differences. Both services offer a similar range of services, including a mobile wallet function, person-to-person transfers, airtime top-ups, and bill payments. Having been in existence much longer, Safaricom has a larger network of partner companies, but Zain state that final technical tests with supermarket chain Nakumatt are ongoing and clients will shortly be able to pay their supermarket bills through Zap.

• Charges: Zain charge a flat fee of KES10 for any transaction, which is lower than M-PESA’s rates – signs of new price competition now that call rates appear to have settled? , but then loading cash onto the account with an agent also incurs a fee proportional to the amount added. Clients are able to make transfers of up to KES35,000, with up to 25 transactions a day.

• International payments: Although Zain, with its borderless One Network, should be well placed to enable borderless transfers as well, exchange rate issues and presumably regulatory issues are still preventing this – an obstacle that Safaricom has also been struggling with. The latter, however, are currently trialling foreign remittances in co-operation with Western Union Kenya: Press Releases: Safaricom, Vodafone, Western Union Partner for International Money Transfer.

• Bank co-operation/competition: Both services regularly emphasise that they do not see themselves as competitors to banks since they mostly aim at providing a service to the unbanked parts of the population. Of course many subscribers will, indeed, have accounts with banks, SACCOs or other semi-formal financial institutions, but as Pauline Vaughan, the Head of M-PESA, explained, there is often an unbanked recipient, and gradually declining average transaction amounts also indicate that poorer subscribers are being reached. While Zap plan to add more banks to their service, Safaricom have signed up the first ‘super agent’, i.e. banks who serve as M-PESA agent of agents, and are able to handle much larger cash sums. Around 10% of M-PESA agents are already financial sector outlets.

According to Zain MD Rene Meza, the company was pleased with the results of the pilot phase. An estimated 40% of Zain subscribers have already signed up for the service even without an advertising campaign. The company also currently has over 3,000 Zap outlets – an important factor in competing against M-PESA’s extensive agent network that numbered a good 7,000 at the end of January 2009.

Perspectives
Despite the encouraging response from its own subscribers, it is unlikely that Zain’s Zap will deliver a serious blow to Safaricom’s M-PESA anytime soon – with two years of operations behind it, the latter is well entrenched in the market, has the largest subscriber base, and pursues an ambitious agenda of developing the service further. In other markets, the introduction of Zap will probably create stronger momentum for Zain.

Safaricom CEO Michael Joseph projected that most major mobile operators would add a money transfer service in the next 12 months Highlights from Safaricom Briefing on Financial Results. Safaricom may have had a head start with some start up funding from the UK’s Department for International Development (DFID) to find ways of expanding access to the financial system, but the overwhelming response from clients has shown that there is significant demand in the market. The competition between M-PESA and Zap will work to the benefit of subscribers – and in medium term, clients will begin to expect this level of service from any mobile operator. So the real question in Kenya is probably who will be the last to introduce a comparable product – Telkom Orange or Econet’s Yu? Since it is unlikely that Kenya’s market will be able to sustain four competing mobile operators, and Orange is already trialling a money transfer product could Yu be the last one in, first one out?

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40 percent have signed up even without any advertising? I doubt it
written by Stefan Staschen, February 19, 2009

Interesting. But I can't believe that an estimated 40% of subscribers have already signed up! It's possible to get the Zap menu pushed to your phone by sending an SMS 'zap' to 455 (and even for this I doubt that 40% of subscribers have done it!). But this is just the menu. One still has to go to one of the agents, present your ID, and sign a form to subscribe. And this is not so easy. I have tried, but I think at the moment it's only possible at Zain Customer Care Centres, and they are few and far between.
I also have my doubts about the pricing. According to http://www.stockskenya.com/new...top=12359, depositing money into your zap account costs KES10 (it's free for M-Pesa), and withdrawals are KES20. So it's not necessarily cheaper than M-Pesa (and there might be charges by the banks on top of this).

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