Ending M-Pesa’s solo story

Ending M-Pesa’s solo story

19 AUG 2014

NEW BLOG: The mobile industry has always preached interoperability because helping one another delivers mutual benefits.

The past evidence quoted in favour of interoperability includes both SMS and voice services whereby ubiquity delivered wider take-up, hence revenue and profit for the industry.

I am aware, of course, that I am articulating an old-school theory. Critics will hold up the success of various OTT services to disprove the wonders of interoperability.

So it is surprising to report another success that predates a WhatsApp or indeed a Skype. Indeed, a big hit from within operators’ own ranks; I give you M-Pesa, the mobile money service offered in Kenya by Safaricom.

The service is not just Kenya’s leading P2P money transfer service but probably the world’s. It enjoys a near-legendary status, and rightly so. No doubt numerically, and certainly in terms of profile, it is head and shoulders ahead of rivals.

In the year to end-March 2014, revenue from M-Pesa in Kenya grew by 22 per cent to US$300 million, representing 18 per cent of Safaricom’s total revenue, although interestingly that proportion did not grow from 2012/13 figures.

M-Pesa lacks interoperability with any of the rival services run by the country’s three other operators: Airtel, Orange and yuMobile. Yet it is still enormously successful. This is not exactly news. Except Safaricom is now under pressure to change its ways.

In July, Kenya’ s leading operator opened up its network of M-Pesa agents to its rival Airtel, which led the campaign to force this change. Safaricom claimed its decision was a commercial one and not a case of jumping before it was pushed into opening up.

Nevertheless, the operator’s unilateral move came just before the Competition Authority of Kenya (CAK), the country’s antitrust regulator, ordered it to open up its extensive network of 85,000 agents to rivals.

For an operator such as Safaricom, this must be a hard pill to follow, having set up a proprietary system off its own back, with no guarantee of success. The operator virtually invented mobile money and is being forced to essentially give a helping hand to rivals who will presumably chip away at its market share.

Of course, a success so great it becomes ubiquitous faces an increased risk of regulatory intervention. In other words, the greater a service’s take-up, the more likely it will be forced to nurture rivals.

Obviously to the casual observer that does not seem fair but there is more at stake here, particularly in a market such as Kenya with relatively low levels of conventional bank account penetration. Mobile money has a heightened importance in the African country where regulators are likely to see a national interest at stake.

Furthermore, Safaricom is going against the trend in mobile money where interoperability is being introduced elsewhere. Three of the leading operators in Tanzania announced an agreement at the beginning of June to let subscribers send and receive mobile money with the users of rival services for the first time.

Tigo, Airtel and Zantel – three of the country’s four largest operators – agreed to allow users to send money directly between one another’s mobile wallets. The operators hailed the arrangement as the first such deal in Africa, although the country’s largest operator – Vodacom – did not sign up. As it happens, Vodacom also offers M-Pesa in Tanzania.

But hold on, this is not the same as what is happening in Kenya. Look more closely, Safaricom is opening up its M-Pesa agent network so rival Airtel can approach and sign them up to act as its agents too. By doing this, Kenya is conforming to what is standard practice elsewhere.

But that is not the same as implementing interoperability with its rival. So an Airtel user cannot send cash from their mobile wallet to the mobile wallet of an M-Pesa users. That requires a link between the two operators’ mobile money systems. Airtel is still pushing hard for that arrangement. When it does, the market will see what interoperability can deliver.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.


Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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