A mobile phone alert received during a transaction. PHOTO | FILE |
NATION MEDIA GROUP
The appointment of Safaricom to drive the Kenyan government’s
fertiliser subsidy programme has opened yet another front in the turf
wars between the telco and its erstwhile partner Equity Bank.
Under
the scheme, farmers will receive electronic vouchers via their mobile
handsets to be redeemed at appointed stockists for discounts on prices.
Presently, subsidised fertiliser is distributed through the National
Cereals and Produce Board of Kenya, but hardly reaches the intended
beneficiaries due to corruption.
The two financial
service providers fell out in 2007 over the sharing of profits in
M-Kesho — the first mobile phone banking application in Kenya — and have
been competing aggressively ever since.
The
fertiliser subsidy programme came in the week that Equity Bank received
approval from the High Court to go ahead with its thin Sim technology,
an interface that will see the bank provide mobile phone services and
money transfer services.
The fertiliser subsidy
distribution system will benefit “over 3.5 million smallholder farmers
across the country,” according to Sicily Kariuki, the Principal
Secretary for Agriculture.
Agriculture contributes a
quarter of Kenya’s GDP and the country has an estimated population of
about five million smallholder farmers. Agriculture is the livelihood
for most of these farmers.
This means that the
fertiliser subsidy project could help Safaricom lock in close to five
million clients on its network. For farmers to enjoy the subsidy, they
must have the voucher entitling them to a discount. These vouchers will
be distributed through the Safaricom mobile phone network.
Safaricom
has cautioned most of its clients against the use of the overlay Sim
technology set for rollout by Equity Bank after a drawn-out legal tussle
and successful pilot, saying it comes with the risk of data breach.
The
thin Sim technology eliminates the need for a user to buy another phone
by enabling the sticker Sim to be placed over the existing one.
This
enables handset owners to make and receive calls from the Equity Bank
mobile phone service while enjoying other value added services that the
bank will offer through the line. Of note is that the lines will ride on
the Airtel network, Safaricom’s nearest rival in the Kenyan market.
“We
already have 800,000 accounts and I’m optimistic we’ll have five
million Sim cards issued by year end,” James Mwangi, chief executive
officer of parent Equity Group Holdings, said during an interview at the
World Economic Forum on Africa in Cape Town.
Equity
Bank started out as a building society with the primary focus of helping
farmers — at the time in central Kenya — to save and access financial
services. It is from this wide base of farmers that Equity Bank has
built its business.
And as the bank launches its
mobile phone service, reportedly at a cheaper calling rate and also than
Safaricom’s, it would want to retain the farmers — some of whom have
stayed with the bank for decades — on its network.
After
the divorce with Equity Bank seven years ago, Safaricom has been
deepening its partnership with other banks without entering into
exclusive agreements as was the case with M-Kesho.
VALUE ADDED SERVICES
Safaricom
partnered with Commercial Bank of Africa (CBA) to launch M-Shwari in
2012, a mobile based banking product that is quite similar to M-Kesho.
CBA has since reported that its customer base has grown to 10 million,
the same as Equity’s current client base, 5.8 million of them active.
The
Lipa na M-Pesa service, which enables merchants to receive payments
safely for goods and services also targets banking hall transactions
from which banks like Equity draw non-interest income. It would,
therefore, make business sense for Equity to unveil a cashless merchant
payment system to rival Lipa na M-Pesa among the value added services
that the thin Sim technology will bring.
The buy goods
and services platform boasted more than 49,000 active vendors as of
March this year who receive Ksh11.6 billion ($117.8 million) per month
on average.
KCB launched the KCB M-Pesa service this
year, a product similar to M-Shwari, which now has 1.4 million users in
partnership with the telco. This coalition is of import since KCB and
Equity Bank are fighting across East Africa for the crown of which is
the biggest bank both in size and profitability.
In
the first quarter of this year KCB reported a net profit of Ksh4.4
billion ($44.7 million) surpassing Equity Bank’s Ksh4.3 billion ($43.68
million) reported in the same period.
Equity Bank had
led the way in the full year results for 2014 posting a Ksh17.15 billion
($174.2 million) net profit higher than KCB’s Ksh16.8 billion ($170.7
million)
Equity and Safaricom are also fighting it out
for turf in the transport sector, where they have separately launched
pre-paid fare cards.
In the education sector Safaricom
Foundation recently broke the ground for its M-Pesa Academy in Thika,
responding to the introduction by the Equity Bank Foundation of Wings to
Fly, which gives scholarships annually to thousands of students for
study in Ivy League American universities.
KCB
Foundation boasts a similar initiative. These may seem altruistic moves
but the end goal is to tap into the future generation by introducing
them to these brands early in their lives.
The genesis
of the aggressive rivalry between the mobile phone services provider
and the bank can be traced back several years. In 2001, Safaricom and
Equity Bank had the same number of customers — 100,000.
Both
had mastered the art of making money off the common man. Unlike their
rivals in each of their respective industries, Safaricom and Equity Bank
packaged their products to fulfill the needs of the common man.
Safaricom
billed its customers for every second they spent talking unlike
Kencell, which billed per minute. Equity Bank introduced a banking model
where customers could operate with no minimum balance prompting a mass
walk out of customers from multinational banks.
A
marriage between Safaricom and Equity Bank made sense in 2007 when they
came together to introduce the mobile phone based banking application,
M-Kesho. But the marriage lasted only a few months. Equity Bank wanted a
larger share of profits because of its large outlet, something which
Safaricom was unwilling to give into.
SPILLOVER EFFECT
The
business rivalry helped by the convergence of telecoms and financial
services, has spurred innovation in Kenya that is just starting to spill
over into East Africa and the Great Lakes region.
Equity
has shown its interest in regional expansion with the acquisition of 79
per cent of ProCredit Bank in DRC while Safaricom, in partnership with
Vodacom, has made its M-Pesa mobile payments solution available in
Tanzania.
Equity says it wants to venture into six
other regional markets while Safaricom has indicated that partnerships
such as that with Vodacom will be replicated in other EAC countries soon
under the One Network Area initiative launched by East African heads of
state last October.
This story first appeared on www.theeastafrican.co.ke
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