Smaller players challenge telcos for pie of mobile money market

Kenya’s mobile money transfer market is headed for interesting times, with the latest results from the regulator showing small ‘outlier’ firms eating into the market dominated by the well-established players.

The latest Communications Authority of Kenya (CA) statistics show major players gained modestly compared to the established telecoms in the first three months of 2015.

While Equity Bank’s Finserve Africa, Mobikash Afrika and Tangaza Pesa recorded some modest gains in the number of subscriptions and agents between January and March 2015, according to CA statistics, Safaricom, Airtel and Orange did not have as much gains.

Equity Group’s Finserve Africa and Mobikash Afrika recorded an increase in both the number of subscriptions and agents - a clear intention to disrupt the mobile money transfer market.

Virtual network

The exception in this group was Tangaza Pesa, whose growth in both subscriptions and agents plateaued at 503,556 and 1,596 respectively. “The entry into the market by the mobile virtual network operator (MVNO) shows there is still potential for growth and further competition in the mobile sub sector,” noted CA in a statement.

“Mobile subscriptions continued on the upward trajectory and recorded a growth of 3.6 per cent to reach 34.8 million subscribers from 33.6 million recorded in the previous quarter. This represents mobile penetration of 85.5 per cent,”

The biggest growth during the period under review was by Finserve. After only three months of existence, Finserve had already added 665,661 subscribers to its name. This represented a 69 per cent increase from the 394,606 subscriptions it had by October 2014. Equity Bank will be hoping to sustain this momentum by converting its 10 million customers into mobile money subscribers.

The bank will also hope to entice subscriptions from such well-established players as M-Pesa with what it considers its competitive transaction charges. Equity Bank has capped the cost of withdrawing any amount at Sh25, compared to between Sh10 and Sh330 charges on M-Pesa.

This could set the stage for a price war that is bound to see the cost of money transfer reduce significantly.

The largest telecom operator, Safaricom, charges its customers between Sh1 and Sh110 to send cash on M-Pesa. Mobikash, which was established in 2011 had 1.69 million subscriptions as of March 2015. This represented an increase of 137,544 to the 1.55 million subscriptions it had in October 2014. Its nine per cent growth was second to Finserve.

In November last year, Mobikash reported a five-fold growth in subscribers on its mobile-based money transfer system. The company had recorded about 1.2 million subscribers by June last year.

Apart from M-Pesa which had a subscription of 20.63 million and 85,756 agents - a growth of 2.4 per cent and 2.5 per cent respectively from October 2014, Airtel Money and Orange Money did not register impressive growth. Orange’s subscription stood at 191,658 which was an increase of 0.8 per cent from October 2014 subscriptions of 190,129.

Orange, however, added about 1,652 agents to its 13,767 in October 2014, representing a rise of 12 per cent. However, Airtel’s subscriptions and agents declined. Subscriptions declined by 3.5 per cent to stand at 3.12 million while the number of agents dipped by 7.4 per cent to stand at 10,179. This comes at a time when Finserve, operating under Bharti Airtel’s infrastructure, has begun offering money transfer services and has already recorded impressive results.

Voice calls

Some observers see this development as a signal by the second largest telecom operator to go slow on the mobile money transfer service even as it ups its gear on the other services.

The telco recorded some modest growth in data, voice calls and SMS during the quarter under review. According to the report, the number of mobile money transfer subscribers in Kenya increased by three per cent to reach 26.7 million up from 26 million recorded during the last quarter while the number of agents rose to 126,622 up from 121,924.

The country’s mobile money transfer has been dominated by M-Pesa, with some industry players such as Airtel Kenya’s Chief Executive Officer Adil El Youseffi describing it as Kenya’s second currency.

M-Pesa’s March 2015 subscription of about 20.6 million represents an astronomical growth of 1,980 per cent from the subscription of one million in 2007.

The mobile money transfer business is estimated to transact more than Sh2 trillion a year, from where Safaricom earned more than Sh26.6 billion in its revenues last year.