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M-Pesa’s Kenyan monopoly broken by Equity Bank

October.07.2014 0 Comments


Kenya’s Equity Bank is rolling out a new mobile banking service that is expected to rival market-dominant M-Pesa’s mobile money transfer platform, which currently has over 18 million active users.

Customers to simply slip a new SIM card from Equity Bank over their pre-existing SIM card in their cell phone, giving the bank access to their phone’s menu, and the customer access to mobile banking.

This new SIM will be using leading telecommunication firm, Bharti Airtel’s mobile network infrastructure to provide its mobile money service, but this doesn’t mean that customers not currently on Bharti Airtel will suffer, as Equity Bank have brokered a deal that the service will be compatible with all of Kenya’s mobile service providers, Safaricom, Airtel, yuMobile and Orange.

This is an integral part to the successful roll out of Equity Bank’s mobile money service, as customers don’t have to purchase a second cellphone especially for their banking.

James Mwangi, Equity Bank’s chief executive, sees this new initiative as essential to improve the current levels of access to financial services in Africa.

“The biggest problem with accessing a bank is not bank charges, it is the cost of access,” says Mwangi. “I will have to go 70km to where the bank is; I will have to pay public transport; I will have to spend the whole day to get to the bank; I have to dress because I have to go to the biggest shopping centre in my district; that is what will be removed.”

Still, Kenya is a regional leader in access and use of financial services, with 77 per cent of the population living within 5km of a commercial bank or mobile money agent, according to a recent report published by Kenya Financial Sector Deepening. Of the total number of financial access points, “mobile money agents represent 75 per cent”, a statistic partly explained by the success of M-Pesa.

In April, the Communications Commission of Kenya licensed three new Mobile Virtual Network Operators (MVNOs). These operators allow companies to provide mobile money services without building new mobile infrastructure by working with existingmobile network operators. Equity Bank was one of the three to receive a licence while Safaricom’s competitor, Airtel Kenya, is to host the MVNO networks.

Equity Bank had analysed their target market thoroughly before rolling out their thin SIM technology through their subsidiary, Finserve Africa. The cost of the service is reflective of the target market, but is likely lower in a bid to break M-Pesa’s hold on the industry.

“Finserve’s services are targeted at poor people who cannot afford the luxury of a duo-SIM mobile phone but need to have access to at least two lines for their various needs and within their budgetary constraints. This need is currently not being met by any of the existing service providers, and that is the critical gap that Finserve seeks to fill through the roll out of the Thin SIM technology,” reads the letter from Finserve to the Director General of the Communications Authority of Kenya (CAK), Mr Francis Wangusi.

In this same vein, Equity Bank has announced that they will not be charging more than Sh25 for amounts transacted through the service, which will hit Safaricom’s M-Pesa’s market share hard.

While as a large and successful mobile payments provider M-Pesa has increased financial inclusion for the unbanked, a competitive market in which multiple companies are competing for custom will force prices down and encourage even better services. In Kenya, as Mwangi notes, as in many African countries, the cost and accessibility of banking services are the most important area for providers to focus their efforts.