Mobile money interoperability good but consumer right to choose must be protected

It is good news since October 4, M-pesa and T-kash customers can send and receive funds directly to and from their mobile wallets.

The move, follows the integration of Safaricom and Telkom mobile money platforms which now allows customers to transfer funds from T-kash to M-pesa and vice versa, with the last phase of integration between Telkom and Airtel expected upon completion of the necessary processes by the two Telcos.

Financial inclusion

Telkom’s inclusion in the interoperability initiative is a significant step towards a more integrated mobile money ecosystem and a boost to the financial inclusion agenda in the country. While opening up consumer choice in mobile money interoperability is a step in the right direction, more needs to be done to ensure consumers are well informed of their choices.

It is recognized the world over that competition and consumer protection can play a direct and important role in promoting economic growth and reducing poverty. Competition not only stimulates innovation, productivity and competitiveness, it also contributes to an effective business environment. We cannot generate economic growth and employment unless we have effective competition in the telecommunication sector.

Competition also delivers benefits for consumers through choice, affordability and improved services.

For consumers to truly enjoy choice, we must address some of the market challenges facing mobile money today. A report on telecommunication competition market study commissioned by the Communications Authority last year, indicates that it costs between two and four times to transfer money from M-Pesa to a user on another mobile money platform as it is to a registered M-Pesa user.

Safaricom also controls 68 per cent of all mobile money agents in Kenya and has nearly six times as many agents as any other mobile money platform.

Given these facts, lack of agent interoperability is currently a major barrier to a competitive mobile money market. Indeed, without it, the chance of mobile money service competition developing fully is small.

Agents want a large enough subscriber base to enable them make a reasonable return on their initial investments; while at the same time subscriber adoption of an operator’s mobile money services is largely based on the availability of a widespread agent network.

As a result of this Catch-22 situation for smaller players, regulation is needed to give competing service providers in this market sustainable agent networks. Unless all Telco’s have the same access to mobile money agents without restrictions then consumers will not enjoy the benefits of a seamless money transfer regime.

As highlighted above, the imbalance in Kenya’s telco sector may see the two smaller Telcos (Telkom and Airtel) unable to sustain their operations owing to distortions, that deny customers a choice, meaning that if this goes uncorrected the telecommunication sector is now closer more than ever sliding into a single player market in the years to come.

Contrary to popular belief, the Competition Policy does not punish innovation or condemn investments made by players but instead applies a set of market rules that in turn correct the market, availing a level playing field for all players – big or small.

Measures to enhance competition in markets are aimed at availing consumer benefit, and similarly to empower consumers which can also spur greater competition in the telecommunications market, going by their demands.

Competition and consumer protection share a close and complementary relationship. Even when there is competition, appropriate regulatory frameworks need be in place for consumers to stay informed about products, services and choose the best option from these.

Switching costs and the complexity of products and pricing may contribute to a skewed market response. Switching costs include time and financial costs as was the case before interoperability.

The Competition Authority needs to embark on a consumer empowerment programme as the custodian of their interests and going by the exposure to new and more complex products and services in the telecommunication sector.

One way of empowering the consumer may be through concerted education, facilitating consumer access to information and enhancing the capacity of consumers to assess information correctly to make optimal decisions.

As we celebrate the integration of the mobile money platforms, let us be aware that consumer empowerment in the telco sector, which today offers relatively more complex products is equally as important as regulatory interventions to help correct the market.

Ms Ruto is Chief Corporate Affairs, Telkom Kenya