From right: Central Bank of Kenya governor Prof Njuguna Ndung’u,
Communications Authority of Kenya chairman Ngene Gituku and CAK
director-general Francis Wangusi announce the approval of the thin SIM
in Nairobi on September 22, 2014. PHOTO | DIANA NGILA |
NATION MEDIA GROUP
By ALLAN OLINGO, The EastAfrican
In Summary
- 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.
- Kenya’s multimillion-dollar mobile money market has also seen local banks develop independent platforms.
- The focus on the new segment by banks could also be a long-term cost-cutting strategy.
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.
However, in view of contentions by Safaricom and a
committee of parliament that thin SIMs exposed users of ordinary SIMs
to data integrity risks, the authorities have ordered Finserve to
indemnify users from losses during the pilot.
“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.
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