While the move is a vote of confidence in mobile money, it also spells doom for telecoms that build customer loyalty and revenues on the service, writes PATRICK GITHINJI
Mobile phone payments are quietly shifting from the being traditionally dependent on SIM cards to mobile applications.
The decision by Orange Kenya last week to allow its subscribers to send and receive money through two mobile phone applications such as Java (J2ME) and WAP, is set to open a new battlefield between telecoms and banks.
Banks, who were originally opposed to mobile money, are fast moving to cash in from mobile money transfers.
Mobile money first hit the market in 2007 with the launch of Safaricom’s M-Pesa. Four years later, mobile money is a revolution of sorts, helping Safaricom weather what could have been a potentially crippling blow from competition.
That all local telecoms have over time launched their version of mobile money tells just how profitable the platform has been. The rest of the world too has moved to adopt the same technology.
Initially limited to holding deposits of mobile money agents, banks are increasingly seeking a bigger role in the chain of mobile transactions.
Previously, banks and telecoms signed partnerships to offer mobile phone-based services. Equity Bank and Coop Bank have been notable, inking deals that enable them offer several services supported by mobile platform.
Among them are Equity’s savings scheme and Co-op Bank’s school fees plan called M-Kesho and M-Karo respectively.
Last November, Orange in partnership with Equity Bank launched by Orange Money.
This was evidently a step up as the arrangement aimed at deepening access to financial services among Kenyans through a solution that combines the features of mobile money transfer services and those of mobile banking.
Buoyed by the results, Equity Bank is now eyeing mobile business free mobile SIM card supported platform.
Equity Bank Chief Executive Officer Dr James Mwangi says the bank is already developing a platform that will help them free mobile transactions from telecoms.
Beyond borders
While speaking about a similar product last week, Orange Chief Executive Mickael Ghossein said the technology allows users beyond the coverage of a specific network to enjoy services of mobile money transfer.
According to Mwangi, the technology will allow users to send and receive money, and pay for goods and services from anywhere in the world with a mobile device and not necessarily credit or debit cards.
While remaining guarded about the architecture of the platform, Mwangi says they would be making it known to their customers soon.
"We are now familiarising ourselves with the platform and see how it runs on our systems," he told Tech•Insight.
While the development is a vote of confidence in mobile money, it also spells difficult times for telecoms. Adoption of this technology will mean consumers no longer have to belong to a particular network to enjoy phone-based financial services.
Telecoms that have relied so much on mobile money products to build subscriber loyalty and boost their revenues will need a rethink of their strategy as the service seeks to break from SIM cards.
Already, Orange seems to have hit the ground running. Just last week, Ghossein revealed a new mobile money application that seeks to reduce reliance on SIM cards to transact.
The J2ME application would be downloaded from the Internet and uploaded onto one’s handset, while WAP is a web interface that can be accessed via the Internet at no cost.
All Internet-enabled handsets can be used to access J2ME or WAP.
Customers using WAP or J2ME will access the existing services available on the menu.
The new access channel to mobile money would also give Orange agents a chance to conduct all transactions via J2ME.
The latest development in mobile money comes against statistics showing that smart phones are increasingly gaining currency among Kenyans.
"With the expected launch of 3G services on Orange, we hope that the number of Kenyans who will be using Internet will rise significantly," Ghossein said.
With a national distribution network, the service takes traditional money transfer a notch higher with its innovations in offering customers a real bank account.
It also brings together the security and robustness of a bank account with the convenience and flexibility offered by telecoms via the mobile phone.
The mobile phone’s success as a versatile financial inclusion tool has caught the eye of international technology and financial companies.
On Wednesday, a financial software firm Craft Silicon, unveiled a payment application, which runs on 3G enabled mobile telephone handsets
The application, referred to as Elma, allows mobile phone users to do business with any service provider who has installed the software. Consumers can transfer money, pay bills, buy airtime, buy stocks and check commodity prices from the comfort of their seats at a monthly average cost of Sh80.
Simless application
Internet giant Google is also set to partner with MasterCard, Citigroup and Verifone to offer mobile payments on phones running its Android operating system in a move that will further distance mobile transactions from SIM cards.
Android is currently the fastest growing platform in the mobile operating systems field, mostly due to the fact that unlike many of its competitors, it is not tied to a single manufacturer.
In Kenya, Samsung, Huawei, Sony Ericsson and LG phones run on the platform expected to take over as the leading smartphone operating system this year after racing into the second position last year.
Four years ago, Safaricom launched M-pesa, a mobile money transfer service hoping to entice a conservative 100,000 users who would use it mostly in rural towns.
Today, the service has amassed nearly 14 million subscribers and facilitates payments for 800 businesses, earning Safaricom nearly a third of its revenues last year.
In February, Safaricom moved to increase the capability of the M-Pesa system by teaming up with Visa on a service that allows its over 13 million users to pay for goods bought online.
