For some reason the government wants the telecommunication companies to open separate companies that will operate their mobile cash business units. If the plans contained in the new National Payment System Regulations Act, 2013 go through, then M-PESA, Airtel Money, Yu Cash, and Orange Money will operate as companies separate from Safaricom, Airtel Kenya, YuMobile and Orange Telkoms respectively.
This move will also see each company pay license fees according to each platform’s annual gross turnover of cash transferred through each system, “Any e-money platform with an annual gross turnover of less than Sh1 billion shall be required to pay a Sh20,000 license fee. It is the lowest fee expected to be charged.The highest license fee, according to the proposed regulations, shall be Sh15 million for any platform with an annual gross turnover of over Sh1 trillion. A turnover of between Sh500 billion to a trillion shall attract a license fee of Sh10 million.” reports Ramenya Gibendi in the Daily Nation. Additionally, the new companies that will operate the m-money will be required to maintain a minimum core capital for electronic retail transfers and e-money issuers. “All such applicants will be required to have minimal core capital of Sh5 million for electronic retail transfers and Sh20 million for e-money issuers,” reads the regulations in part.
The move that require the telecos to operate separate corporate entities seem to be targeting two things: 1. A way by which Kenya can have a greater stake at the m-money businesses and 2. new sources for government revenues in license fees and taxation. As the m-money business units stand now, Kenyans do not have any stake in them as they are owned exclusively by foreign companies. M-PESA is 100% owned by Vodafone of UK, Orange Money by Orange Ltd of France, Yu Cash by Essar which is Indian and Airtel Money is owned by Bharti Airtel which again is Indian owned. To incorporate these services, therefore, means that the government has a chance to own some of the shares just as they did with Multichoice. The government has a significant stake in Multichoice Kenya thus has a say on how the company is run.
The licensing fees as stipulated gives the government a significant source of revenue where M-PESA
monopoly as a company will be required to pay an annual license fees of Kshs. 15 million. What is not clear is whether the cost of operating these companies, given the need to possibly employ additional staff, incur others running costs, and also the pay other fees including the required annual license fees, will mean the cost of M-Money services will increase for the ordinary citizen.
The cost of m-money can also increase if another plan by the telecos to have M-PESA opened up for them materializes. The consultations by the government and the telecos are at an advanced stage and Safaricom seem to agree with the telecos that M-PESA shall be opened up for them to use. Safaricom’s agreement means they have understood the M-PESA monopoly that will come with either option available for opening up M-PESA.
The options for opening up M-PESA that might lead to M-PESA monopoly are on two front; 1. will the telecos continue using their own platforms but have M-PESA as the powering platform for their transactions meaning access to the well spread M-PESA agents across the country? OR, they will abandon their platforms completely and adopt M-PESA as the default m-money platform (e.g. Airtel having M-PESA in its menu items)?
Either way we are headed to an M-PESA monopoly where Safaricom stands to gain whereas the end consumer stands to lose. In the first scenario where M-PESA become the powering engine for whatever money transfer used in the country, Safaricom will have to set higher royalty fees for the competitors, forcing the competitors to price their services over and above M-PESA’s prices, leading to users defaulting to M-PESA thus killing the other mobile money transfer services hence M-PESA monopoly.
In the second option where the competitors abandon their platforms to fully integrate M-PESA means M-PESA is the sole m-money platform in the country hence M-PESA monopoly. This second M-PESA monopoly approach offers the other telecos an advantage. Safaricom will no longer point to M-PESA as a reason to remain in the Safaricom network as M-PESA will be available across all networks thus the other telecos will compete with Safaricom on voice, text, and data services in order to lure current Safaricom subscribes into their networks. I think this is the option they are rooting for but still it will create an M-PESA monopoly which means that Safaricom will price their M-PESA services as they deem fit. Actually this option will make M-PESA competitors be the hitherto forgotten services like Western Union, Money Gram, PostaPay and the likes which charge exorbitant transaction fees. That means that M-PESA will have the leeway of re-structuring their transaction fees to closely match those of Western Union to the detriment of the consumer.
I wish the telecos could just maintain their current m-money offerings but be competitive by recruiting agents at each station M-PESA has an agent. But since that is next to impossible, what options do we have to avoid an M-PESA monopoly scenario?