M-pesa celebrated its 9th Anniversary in early March this year, with a colourful reminder of how it has managed to change people’s lives for the time it has been in existence. Launching in 2007 as a money transfer service, M-Pesa has transformed to accommodate banking services, different payment services and has won various awards along the way. The mobile money transfer and payment service has now become, by far, a revolutionary innovation that is causing a stir globally and contributing greatly to Kenya’s GDP.
Most recently, Michael Joseph, the former Safaricom CEO and current director of Mobile Money at Vodafone, was ranked 3rd by Business Insider in their Creators List. Mark Zuckerberg of Facebook was first and Starbucks’ Howard Schultz came in second. This was another reminder of how M-Pesa has contributed to the financial sector and changed many lives along the process. It is an effective mobile platform that brings convenience where banks continue to lack and security where moving around with cash is a great risk. But with all the good things M-Pesa has to offer, could this globally recognized platform become the innovation that was?
Before you dismiss this thought, allow me to make a case. M-Pesa functions best where delivery of financial services is a great concern, and this is why it has managed to do so much in the 9 years and counting that it has been operational. Through M-Pesa, people have managed to open up small businesses that they never thought they could, financial inclusion has been extended to cover the greater unbanked Kenyans and economic interactions have greatly shifted. For these reasons, the mobile based platform continues to thrive in places that lack in financial inclusion such as Kenya, Tanzania and other markets, but fails in countries with better inclusion.
South Africa is a recent example where M-Pesa has failed to make it in terms of subscriber base, with the mobile money service amassing only over a million customers in the years it has been operational in the country. Since launching in 2010, the service had a little over 70,000 as active subscribers. According to Vodacom, the mobile network under which M-Pesa was available in South Africa, the success factors that exist in Kenya and other markets were not present in the country. The larger population already has access to banking services. “South Africa banks have made it a priority to offer banking services to the economically disadvantaged…and M-Pesa didn’t offer much on top of that to make it attractive.”
Why M-Pesa Could Be Counting It’s Glory Years
While M-Pesa closed its doors because it could not offer anything more attractive to already banked consumers in South Africa, Kenyans are already interacting with an attractive alternative. Now, we already know that Kenya is the largest market for M-Pesa. It’s the home country to this life changing innovation, with about 19 million active subscribers to show for and registering trillions annually in terms of deposits, withdrawals and transfers to date. But let’s talk the bad news. According to the Communications Authority, all telcos except Safaricom gained subscribers in the quarter ending 2015. The mobile operator has since overturned that to grow subscribers in the quarter ending March. But that’s where a dark shadow starts to cast on M-Pesa in Kenya.
In the same quarter ending March, Equitel – the attractive alternative for economically disadvantaged Kenyans – has been recording significant growth. When Safaricom lost about 425, 000 subscribers to the end of last year, Equitel went ahead to gain subscribers by a 24.3% margin in only three months. Currently the number of Equitel subscribers since launching last year stand at over 2 million and the platform has recorded about 62.4 billion worth of transactions. The actual number of transactions was at 44.7 million by March end. This is confirmation that Equity bank’s mobile transfer service is indeed picking up at a fast pace and could become a direct competitor to M-Pesa in no time.
From the very start, it was clear that Safaricom was afraid of what could become of equitel once it launched in the country. The telco challenged the bank’s thin-sim technology to which it lost, and proceeded to increase charges for those using the new service. When Equitel launched in July of last year, users were initially disappointed by increased charges for transfers between the service and M-Pesa. Equity bank later clarified that the added charges were from M-Pesa side, demanding explanations from both the telecom and CBK. Safaricom later retracted the charges. Today, for one to send money on equitel lines, transactions are free of charge, with the only existing charges aside from tax being to Safaricom subscribers.
Equitel currently offers most of the services that the M-Pesa platform offers, and it continues to grow to accommodate more. Towards the end of June, Equity Bank’s CEO James Mwangi announced that the bank would be loaning its customers money to buy a dual SIM phone, as long as one of them was an equitel line. This may not appear as a big deal to many, but then again Equity designs its products for the common mwananchi or what South Africa would call, “economically disadvantaged”. The benefit of this is that Equity will be selling a good option to a large number of Kenyans and at the same time increasing the doubt that already exists among M-Pesa users (based on pricing differences) and affirming the promise of equitel.
Equitel’s growth is just a tip of the iceberg, and while most may shy from highlighting how fast the service is growing, either from ignorance or denial, the fact is Kenya’s mobile money sector is evolving to great heights. M-Pesa does not enjoy a monopoly as does the likes of Kenya Power. It is a near-monopoly – yes – but it is not one, and could soon become just another mobile money service among many. It could continue to do well, especially with the growth in other markets outside Kenya and the projects it continues to become part of, but its glory in Kenya may be reaching a saturation point in a few years.
Airtel money may have failed at gaining a competitive advantage against M-Pesa, but then again Airtel has always struggled to attract subscribers as a mobile network. Most of the operator’s subscribers were the first to move to Equitel when it launched last year and its subscriber base continues to drop, as equitel’s goes up. The mobile money evolution stage is already set and all we can do is watch as it unfolds. Changes in fees may arise along the way and law suits may continue to exchange in court rooms, nonetheless, the much awaited shakeup is bound to happen.