Don’t be excited yet, Equity Bank might not pull the mobile money business

It’s been a month since I told a close friend of the plan Equity Bank has on mobile money business yet the excitement I saw in him is still very fresh in my mind. Although mobile money has proved to be a nightmare to Orange, Airtel and Yu, my friend thinks that Equity Bank stands the best chance to give Safaricom a run for its money. I asked him not to be so excited but he told me to read, carefully, the history of Equity Bank.

The history of Equity Bank

Many people have pointed out the history of Equity Bank as a solid ground that will make the bank successful in the mobile money business. Even though the bank had operated as a formidable building society since 1984, it was declared insolvent in 1993 but still was able to rise to become the biggest bank in Africa by customer base to date. When it was registered as a bank, Equity decided to trod down a path being shunned by most banks, and that is to make banking services almost free.

Equity came up with strategies like implementing zero balance, zero ledger fees, zero deposit fees, no hustle to open up an account, and numerous other friendly products and services e.g. not requiring those who intend to open up accounts to present passport photos.

The big players in the industry shunned Equity’s strategies as non-sustainable and thought that the bank will fall sooner than later; but about seven years later, every bank is to an extent emulating some of Equity’s strategies to stay afloat.

Equity Agents

The reason Yu, Airtel and Orange have not been able to match the success of M-PESA in the mobile money is their lack of penetration countrywide agency wise. You won’t expect me to for instance ask someone to send me money via Airtel money when the nearest agent is 200 meters away yet M-PESA’s agents are as near as 20 or so meters from my house. The nearest place I can access an Orange money agent is in town which is 5 kilometers away meaning I have to use a motorized form of transport to access the cash. Forget Yu agents, trust me I have never seen one anywhere. Maybe I’m not just keen.

Equity Bank is not bad agency wise. In addition to having several bank branches in all major towns and at least a branch in rural towns countrywide, Equity also has penetrated the estates by allowing business men and women, mostly those who are already offering M-PESA services, to be Equity Bank Agents. I don’t know the statistics but given my experience in Nakuru and Nairobi, possibly each person has access to Equity Bank services within one kilometer radius in all major towns.

So if Yu, Orange and Airtel have failed because of the agency issue, then Equity is not as disadvantaged as them.

Cost of using M-PESA

The other mobile service providers have also tried to take advantage of the high cost of using M-PESA services. Airtel was in the forefront – even running the ad of “je unagongwa” which sadly did not help them much. I remember a friend complaining over the ad, “kama tunagongwa ina wahusu aje? Si ni pesa yetu?” 

When Airtel and the others zero rated the cost of sending money, Safaricom replied by increasing theirs. Instead of consumers shunning M-PESA for Yu, Orange or Airtel monies due to the increase in M-PESA charges, people still got stuck on M-PESA and even accelerated their use of the service year in year out if the growth in M-PESA’s revenue is anything to go by.

Equity Bank also wants to fight M-PESA on the avenue of cost. They have categorically stated that the upper cap for transacting Equity Money will be Shs 25. Currently, the upper cat for transacting M-PESA is Shs 330 for sending amounts in the range of Shs 50,001 to Shs 70,000. For the same service, Equity Bank wants to save you Shs 325 on transaction charges; who wouldn’t love that? But the cost approach has not helped the other operators, maybe because the others don’t have the agency network?

Combining the three

By combing the strength of its success in banking, the good networks of agents across the country, and low cost offering for transaction fees, Equity hopes to challenge Safaricom as the dominant player in mobile money business. But the big question is, what will Safaricom do to counteract the possible stiff competition that Equity is likely to bring to the play ground?

Safaricom will for sure fight back and they already have an upper hand in the fight mainly on three fronts:

  1. The money
  2. The brand recognition
  3. And customer loyalty.

When Orange declared war against Safaricom (read Orange Vs Safaricom, let the war begin), Kachwanya opined that Safaricom could emerge the winner given the massive resources Safaricom has on its disposal. The same argument can be brought here. Safaricom recoups more than 100% of the the mobile phone industry’s profits as the competition are mostly in a loss making business. Safaricom is also the most profitable company in East and Central Africa. Compared to Equity Bank, Safaricom’s pre-tax profits for the year ended 2014 stood at Shs 23 billion while Equity’s profits stood at a mere Shs 5.4 billion, which basically means Safaricom is more than four times stronger than Equity Bank when it comes to waging a serious war.

Safaricom’s M-PESA too has the advantage of being synonymous with mobile money. One man once said, “You know your brand has arrived when it becomes a verb”. He gave examples of Google and Facebook that had developed beyond being mere online services to actually becoming verbs used in day to day speech. Nowadays no one uses the word search but rather Google for all online searches. Google that. Sending money in Kenya is no longer referred to as sending money but M-PESAring whatever amount to be sent. Even if Equity Bank’s mobile money become successful, I bet users will still prefer to ask the others to M-PESA them whatever amount of money via Equity Mobile Money.

Thirdly, Safaricom has bewitched Kenyans into loyalty. I don’t know where they got their juju from but it is so hard to understand why Kenyans, despite the numerous challenges they constantly complain of in Safaricom’s network, no one actually ever moves to the other mobile network providers.

Lastly, Safaricom is not blind to Equity’s past successes. In fact, Safaricom and Equity have partnered in some not so successful products and that means Safaricom is very much alive to Equity’s strengths.

These strengths that Safaricom has against Equity Bank are the reasons you shouldn’t be very excited about the upcoming mobile money to be offered by Equity Bank in a week’s time. What Equity Bank should know is that Safaricom is capable to lowering its transaction charges to match their offerings without feeling a pinch – maybe.


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