If you live in Nairobi, it is cheaper to stack shs 100,000 in a brown envelop, get into a vehicle, and deliver it to someone in Nakuru than use M-PESA to send the shs 100,000. If you are wondering how, then the article Equitel is the solution to M-PESA’s inflated tariffs will breakdown this for you. Actually, as I explained in that article, traveling from Nairobi to Nakuru and back is shs 137 cheaper than sending shs 100,000 through M-PESA. The main reason I wrote that article was to explain that it is Equitel that would save Kenyans from M-PESA Extortions.
About two years after I expressed optimism on the possibility of Equitel saving us from M-PESA Extortions, Equity Bank held a media event to release its results for quarter one of 2016 financial year. According to the results, the bank now has slightly over 10 million customers; 1.8 million of whom transact via Equitel mobile services. Further, the 1.8 million Equity Bank customers who use Equitel were able to transact a total of shs 45.6 million over the quarter, a 314% increase from the shs 11 million transacted in quarter one of the previous financial year.
A 314% increase in transaction value seems huge, but this is still nothing compared to what M-PESA is doing. Between October and May this year, Safaricom has reportedly increased the volume of M-PESA transactions by 48% to surpass shs 15 billion transactions per day – meaning that over a 90 day period, M-PESA transactions are at a record shs 1.35 trillion. Over the same period of time therefore, M-PESA outperforms Equitel 30 million times over.
Per person, given that M-PESA has slightly over 21 million subscribers, an average M-PESA customer transacts about shs 714 per day whereas an average Equitel customer transacts shs 0.28 per day. Meaning that an average M-PESA customer transacts 2550 times more than an average Equitel customer. This is despite the fact that 90% of Equity Bank loans have gone through Equitel in the first quarter of 2016 financial year. By volume of transactions therefore, Equitel is far from saving Kenyans from M-PESA Extortions – and this has little to do with the meagre size of Equitel subscribers compared to M-PESA subscribers.
The question therefore is, why is Equitel not luring the millions of disatisfied M-PESA customers who complain about M-PESA Extortions on a daily basis? The quick answer would be brand awareness. Equity Bank has promoted Equitel as product for Equity Bank customers, and this has meant the over 38 million of mobile phone users have shied away from using the Equitel mobile service reasoning that Equitel belongs to Equity Bank customers only. The second part of brand awareness is that Equity Bank itself (or Finserve Africa Limited) is not bombarding Kenyans with Equitel everywhere. You will watch your TV from 7PM to 10PM in all the main TV stations and miss to see a single Equitel ad. You’ll listen to all the main radio stations and never hear anything about Equitel, and you will walk across some parts of your estates and streets and never see any Equitel banner. On the contrary, Safaricom is everywhere. Safaricom and M-PESA are in the back streets, at the backyards of your house, in your favorite Internet websites, across all social media platforms, in every newspaper, and in every radio and TV station. If Equitel does not pursue this type of aggressive brand awareness campaign, they will never get even anything close to a 30% mobile money market share.
The second question I would like to ask is, why is that two years later only 1.8 million out of 10 million Equity Bank customers have subscribed to Equitel? Whereas 80% of Safaricom subscribers have subscribed to M-PESA, and did so within a few years after the rollout of M-PESA services, only 18% of Equity Bank customers are on Equitel. A plausible answer is that most of Equity Bank customers are quasi customers. Consider this, if over 90% of Equity Bank loans passed through Equitel, and there are only 1.8 million Equitel subscribers out of 10 million Equity Bank Customers, then it means Equity Bank operations depends on the 1.8 million Equitel subscribers – and the rest are nothing but book customers. Most likely, these 1.8 million Equitel subscribers have multiple accounts but can only subscribe to one Equitel line.
The last question to ask is this, is Equitel really able, at some point in the future, to actually save Kenyans from M-PESA Extortions? The easy answer will be to say, “let us wait and see”. But considering that that most probably Equitel will not list customers outside of Equity Bank, and that most probably the bank has less than 3 million active customers, together with the third fact that Equity Bank seem uninterested in luring the other 38 million mobile users in Kenya to subscribing to Equitel, then the verdict as at now is that Equitel saving us from M-PESA is a long shot – a very long one – and as I wrote sometime back in the article, Don’t be excited yet, Equity Bank might not pull the mobile money business, Equitel has no weapon to fight M-PESA, not even pricing where it intends to drop the 1% charge up to the shs 27.5 upper cap for sending money.
When I wrote that article in June 2014, there are those who faulted me in the comments section, reasoning that Equity Bank’s success in the banking sector was a sure track record useful in gauging the potential success Equity Bank would have in the mobile money market. According to them, the stumbling blocks faced by the other mobile service operators that hindered them from breaking into the mobile money sector were not major problems for Equity Bank. This is because Equity Bank had and still has the most widespread agency network second only to M-PESA agency, has better understanding of pricing, and controls over 40% of the banking sector’s customer base. With those stumbling blocks taken out of the way, many expected for Equitel to give M-PESA a run for her money within a year or two, but two years down the line I can still strongly state that Equitel is very far from saving us from saving us from M-PESA Exorbitant Pricing.