Can Equity Bank save Kenyans again?

It is sad to read the news that Yumobile’s plan to exit the Kenyan market is at an advanced stage. Equally sad is the news that Orange is working on an exit strategy or to be more diplomatic, planning for the worst if the worst ever happens. According to the summary of the news, Orange is rolling out an audit programme the outcome of which will inform the top management’s decision on whether they’ll remain in the region or call it quits. The exit of both Yu and Orange will automatically take Kenyans back to the monopolistic age…but not so quick…Equity Bank and Nakumatt want to join in!

The exit of Yumobile and Orange Kenya reminds me of the banking industry prior to Equity Bank. In the years preceding 2005 (Equity Bank having been incorporated as a commercial bank in December 2004), the big banks in Kenya were exiting the rural areas citing lack of business. During this period, the banks were not only charging outrageous amounts for withdrawals but had as high as Kshs 10,000 as minimum ordinary account balances,  deposit fees of about Kshs 200 and a number of other difficult to meet terms and conditions that could not allow ordinary Kenyan to operate a bank account.

The only bank that was a bit lenient was Post Bank but their banking system was way too manual. One would end up waiting for over 5 hours to do a simple transaction of withdrawing cash. Then came Equity Bank. Equity Bank introduced zero minimum balance, zero ledger fees, zero deposit fees, no need to carry along hard to find documents in order to open an account except for an ID photocopy among other measures that saw the bank attract the millions upon millions of unbanked Kenyans. The measures have seen Equity Bank become the largest bank in East and Central Africa by customer base and enabled it win a number of Awards not just in the region but in entire Africa.

Paralleled to the telecos industry, Equity Bank intends to enter the mobile telephony market at a time when big players are planning to quit…just as the big players in the banking industry were quitting the rural unbanked populace prior to 2005. Although Equity Bank was able to save the rural folks by introducing very cheap and affordable banking services by eliminating a number of hurdles on opening and maintaining bank accounts, the telecos industry is faced with a unique challenge – the unwillingness of Kenyans to buy cheap.

In attempts to borrow a leaf from Equity Bank, telecos like Airtel, Yu and Orange have tried to sell cheap services including free calls, free text messages, free Internet access to selected websites, and sending money for free via their respective mobile money platforms but these have not worked against Safaricom’s expensive voice calls, expensive Internet services, expensive SMS options, and increased charges on both sending and withdrawing monies on M-PESA…subscribers still prefer Safaricom’s services at the rate of 4:1 (4 for Safaricom and 1 for all other telecos combined). Even the latest attack on Safaricom by Orange on voice call charges seems not to be paying off. This means, if Equity is to save Kenyans from the spell of Safaricom, it must think twice before adopting the strategy it adopted in the banking industry.

But adopting a totally unique strategy won’t be easy for Equity Bank. Information out there indicates that Equity Bank intends to enter the telecos market by relying on infrastructures set up by Safaricom, Airtel, Yumobile, and Orange. This means that if it is quality of services (based on infrastructure deployment), Equity Bank will not be able to offer any better services compared to what is currently available. So, Equity Bank won’t ride on quality either.

We have eliminated quality of service and price points as possible fighting grounds Equity Bank could use to lure customers to its services. This leaves Equity with only two options – customer care and value adds.

There is nothing much to say about customer service but I believe beating Safaricom in this area will be a tall order. Safaricom has invested heavily on customer service and I doubt if anyone with even half the subscribers Safaricom has will be able to promptly answer to customer’s queries at the rate Safaricom does it…not only in the traditional toll free lines but also on social media outlets.

So the only viable  option left for Equity Bank to capitalize on is value add especially value add tailored to meet the needs of its bank customers. I’m not sure what this value add would be but if Equity Bank can develop a product desirable even by 60% of its accounts holders, then it shall have established a footing of being at least the third teleco by subscribers in the country.

Mobile based financial services e.g. enabling micro and small enterprises to easily access business loans might be a viable alternative to pursue. There are a number of Kenyans already running micro and small enterprises across the country but access to cheap credit is the stumbling block. Although Safaricom and CBA have attempted to revolutionize this by introducing M-Shwari services, the terms and conditions are still not favorable to the very needy Kenyans. Equity Bank can take more risk and lower the “loan processing fees” charged by M-Shwari to e.g. 4% or to a fixed amount for every loan range and probably this would attract a number of low income earning Kenyans to its teleco services.

For Equity Bank to save Kenyans again, they really need to put on their thinking caps longer than usual.