News Analysis: Competition Asking for Access to M-PESA
Thursday, 30 June 2011
Mobile money interoperability resurfaces again: In a press release, yuMobile Country Manager Madhur Taneja said he welcomed the recommendation of a force set up by the Prime Minister’s office that mobile operators should work towards a seamless mobile money system that would be regulated by the Central Bank of Kenya (CBK), the banking regulator, and in which subscribers can send and receive money through their mobile phone across networks: “It is our desire to give our subscribers the very best in services and one way of doing that is to ensure that we eliminate any blockages that hinder consumers from making choices that suit their needs. Customers should be able to transfer money across networks just like they are able to make calls and send text messages, and with yuCash, they will enjoy affordable rates and unique features such as being able to transact online when they don’t have their mobile handset at hand. We hope that the CCK and Central Bank Kenya will back the implementation of this useful platform that is long overdue.”

Airtel has made the same proposal to the Prime Minister’s office and wanted access to Safaricom’s agent network. However, in March 2011, the CBK had argued against requiring Safaricom to open up their systems: Although the CBK was keen to widen access to financial services and bring down costs, CBK Governor Prof Njuguna Ndungu also pointed out that Safaricom had made a substantial investment in building the M-PESA system and its extensive the agent network, and its proprietary rights should be respected.

It is easy to see why Airtel and Yu are pressuring CBK for mobile money interoperability: A good 80% of Safaricom’s subscribers, or 13.4m, are registered M-PESA users, and the company has built a network of 27,000 agents – a critical factor as it makes electronic money held in the M-PESA account instantly accessible across the country. Former Safaricom CEO Michael Joseph, who supervised the M-PESA rollout since its launch in 2007, argues that this is, in fact, a key investment: The technology is only one part of the success – just as important, if not more so, was building the agent network, training and monitoring them, and marketing the services.

As with voice services, the overall market would probably be served better if there was more balanced competition in the telecoms sector. But the status quo is that Safaricom have made the investment in both the technology and their agent network for years. Ndungu effectively told the other operators to build a similar network of agents first before asking to use Safaricom’s.

It is also an interesting argument in the context of the current developments in Kenya’s mobile telecommunications sector: In mid-June, the Communications Commission of Kenya (CCK) halted another scheduled reduction of the interconnect rates on presidential orders. This came in the wake of Airtel’s aggressive tariff cuts that already eroded operators’ revenues. Although nobody doubted that organisational inefficiencies had left scope for tariff reductions, Safaricom had cautioned that further reductions in voice tariffs threatened to affect operators’ investment in the mobile industry. Of course this would be less of an issue for Airtel and Yu if they can piggyback on someone else’s investments.

 

Also read: Expanding Financial Services in Kenya: Agency Banking versus Mobile Banking



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