How cross-network money transfers will impact Safaricom, Airtel, Equitel

A client using a mobile money service M-Pesa. Safaricom and Airtel recently launched a pilot test of the cross-network service in preparation for a rollout to the public. PHOTO FILE | NATION 

In Summary

• Safaricom and Airtel recently launched a pilot test of the cross-network service in preparation for a rollout to the public.
• The cross-network transfers are limited to Airtel and Safaricom employees in the pilot phase.
• Mobile money interoperability has been touted as one of the solutions to Safaricom’s dominance of the telecoms market.

By NJIRAINI MUCHIRA
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Will M-Pesa maintain its position as the leading mobile cash transfer service in Kenya when the mobile money interoperability programme is rolled out?

Safaricom and Airtel recently launched a pilot test of the cross-network service in preparation for a rollout to the public.

Customers have praised the move, which will make money transfer more convenient.

“I am a captive of M-Pesa, like many other Kenyans. That is why the government needs to ensure that interoperability happens,” Kiriro wa Ngugi, a public policy analyst, told The EastAfrican.

The cross-network transfers are limited to Airtel and Safaricom employees in the pilot phase.

“One of the key reasons we need interoperability is to make sure that people are not limited by a closed network. You should be able to send money to anyone on any network and receive money from anyone,” said ICT minister Joe Mucheru in an interview with the Business Daily.

Mobile money interoperability has been touted as one of the solutions to Safaricom’s dominance of the telecoms market. Greater convenience in cross-network transfers would encourage customers to sign up onto smaller operators.

How it works
Mobile money service users who currently receive money from a rival network only get a text message on their phone, which they use to get cash from agents.

Withe interoperability, money received from rival networks will reflect in real time as cash available for use in their mobile wallets.

Mobile networks have been negotiating over this new system for almost a year.

Mr Mucheru said that Telkom Kenya is expected to come on board once it launches its mobile money service.

Tanzania and Rwanda have already adopted interoperability.

A 2016 study by the GSM Association, global telecommunications trade body, argued that the flow of funds among interoperable mobile money networks in Tanzania appeared to be two-way, “allaying concerns that only one provider would benefit.”

A report by UK consulting firm Analysys Mason says that Kenya must set a strict timeline for full implementation of mobile money interoperability in order to open up the mobile money market to healthy competition.

Customer loyalty
According to the report, Safaricom’s lion share of the mobile money market through its M-Pesa service, coupled with the difficulty and expense of making cross-platform mobile money transfers, is a key reason other operators have failed to make progress in the telecomms market.
The company has also locked subscribers into its network by applying different fee structures and fee levels on money transfer.

“Interoperability would benefit the smaller mobile money providers as it would reduce the ‘club effect’ currently enjoyed by Safaricom,” adds the report.

It adds that the company’s dominant position in the retail mobile money market offers a strong incentive for customers to remain loyal to its network.

Lion’s share

Currently, M-Pesa has about 80 per cent of the market share in a country where penetration of mobile money stands at 58 per cent of the population.

In Tanzania penetration stands at 34 per cent, Uganda at 26 per cent and Rwanda, 17 per cent.

On average, a subscriber on the M-Pesa platform makes six transactions per month whereas an Airtel Money subscriber makes 0.6.

Although an Equitel subscriber makes 10 transactions per month, this is attributed to the fact that a majority of Equitel subscribers are Equity Bank customers who acquired their subscription primarily because of the banking features that Equitel offers.

Safaricom is more expensive than all its competitors for transfers to unregistered users. It costs two to four times as much to transfer money from M-Pesa to a user of another mobile money platform.

Airtel Kenya does not charge users for transfers to unregistered users or those on other platforms.

Safaricom also accounts for 67 per cent of mobile money agents and about 40,000 merchants who accept M-Pesa payments.

“Given Safaricom’s high share of mobile subscribers, other mobile operators wishing to provide mobile money services need an acceptable method of transferring money to and from Safaricom subscribers,” states the report.

It adds that an independent mobile money provider also needs a way of accessing Safaricom subscribers in order to be successful.

The report warns that Safaricom’s market dominance has resulted in lack of competition and high mobile money tariffs because the company is able to set tariffs, independently of its competitors.

It has also resulted in lack of innovation with the company’s opposition to Equitel’s launch of thin SIM technology being cited as an attempt to stifle innovation in the market.