The Central Bank of Kenya (CBK) is pushing telecommunications companies towards full interoperability - the ability of customers to pay anyone anywhere, with settlements happening in real-time.
While this is good news for customers, the revolutionary idea has Safaricom, Airtel Kenya and Telkom pulling in different directions.
Safaricom, whose mobile money service - M-Pesa - controls 99.9 per cent of the market, is open to the idea but says the rest of the players should learn to invest to make money, and not wait for freebies.
“We are successful with M-Pesa, but why have we been successful? Why do we have 99 per cent market share?” poses Safaricom Chairman, Mr Michael Joseph, in an exclusive interview with Financial Standard.
“It didn’t happen because we got some favours from somebody. The reason why we are successful with M-Pesa is the massive investment we have made, mostly in distribution.”
That is the path he wants Airtel and Telkom Kenya to take to grow their Airtel Money and T-Kash products respectively.
The latest data from the Communications Authority of Kenya shows that M-Pesa had 261,150 agents compared to 22,802 and 8,349 for Airtel Money and T-Kash respectively as at the end of last December.
In terms of the value of transactions, CBK data shows M-Pesa commanded Sh2.206 trillion or 99.9 per cent of the total Sh2.208 trillion worth of transactions in 2021.
CBK recently rolled out the national payment strategy 2022-2025, with part of the focus being to build on the 2018 move that allowed sending of money across mobile money platforms.
The overall aim of full interoperability, CBK Governor Patrick Njoroge says, is to provide customers with seamless, secure and affordable functionality to send and receive money from any financial institution across the payments ecosystem.
Safaricom supports this. Mr Joseph says the telco is alive to the fact that to meet CBK’s goals, it needs to share some of its massive resources with competitors.
But this is a tough ask given the billions of shillings Safaricom has invested over time in building its current infrastructure.
“To share our infrastructure and distribution agents just like that? Come on, you need to invest to make money,” said Mr Joseph. “I don’t think it is the right thing to force a company that has spent billions or perhaps trillions of money to create the business we have created and then to have to give it away because somebody else doesn’t want to spend their money.”
Safaricom’s capital expenditure has been on the rise over time as it won new subscribers and enriched its products and services. This is as its competitors struggle.
The telco has, for instance, spent Sh180 billion as capital expenditure in the five years to March 2021, being an average of Sh36 billion annually.
Mr Joseph says the difference between Safaricom and its competitors has been the distribution network. The absence or little investment by its rivals such as Airtel, Mr Joseph claims, has meant that even if they are cheap, “they cannot make much sense to customers.”
“Why would Airtel not have a successful mobile money business? Their prices are cheaper than ours, and they have customers. Why aren’t they successful? There is a reason for that: distribution,” he says.
“They lack distribution because of lack of interest in investing. They want to be given everything on a platter. I don’t think that is the right thing to do,” adds Mr Joseph.
Airtel does not charge anything for customers to send between Sh1 to the maximum allowed Sh150,000 from one Airtel Money customer to another. Charges for Safaricom, on the other hand, vary between Sh6 and Sh105.
As the market waits to see how full-scale interoperability will shape up, Safaricom will also have to confront the pressure to bring down M-Pesa charges.
The National Treasury says it will soon make proposals to cut M-Pesa charges on the back of increased debate over the pricing of the service. Treasury Cabinet Secretary Mr Ukur Yatani said in a presentation to the Senate, without giving details, that the ministry will soon make proposals to address this.
Mr Yatani had been summoned by the Senate to answer queries on the perceived monopolistic practices by Safaricom. He said one of the sources of concern with mobile money was the perception by consumers and small businesses that the rents from digital technology are “unfairly accruing to Safaricom.”
“This is in the area of unconscionable/excessive rates and Safaricom being a critical trading partner for SMEs and consumers. We will soon be presenting some proposed amendments to deal with this scenario.”
If successful, the move will mark another cut for the telco, which effective January 2021 effected a 45 per cent cut in M-Pesa transaction fees for low-value transaction bands. Mr Joseph says that a reduction of charges while still leaving room to make a return from increased volumes, is a welcome idea.
“I do believe our pricing can be reviewed and looked at again. I don’t think we should be regulated to bring prices down. We should do it because it is the right thing to do,” he said.
Safaricom does not charge to send between Sh1 and Sh100, but the fee varies from Sh6 to Sh105 for transferring between Sh101 and Sh150,000.
M-Pesa withdrawal charges for registered customers range from Sh10 to Sh300. They apply for withdrawals from Sh101 and above.
“I do believe that we have heard what people are saying about M-Pesa, particularly at the lower end of transactions, and I think we should consider. I do believe they will come down. I am pretty sure,” says Mr Joseph.
“As the mother of M-Pesa, I know the closer we can bring our charges closer to zero, the better. Then we will make money through volume of transactions.”
Safaricom started M-Pesa in 2007 and has been on a growth trajectory, overtaking voice to become the top service revenue earner for the telco.
M-Pesa accounted for Sh52.33 billion (37.8 per cent) of the telco’s Sh138.43 billion total service revenue for the half-year ended September 2021.
Safaricom is eying the Ethiopian market with the money transfer service, having secured a telecommunications licence in the Horn of Africa country last year.
Ethiopia is home to over 115 million people, making it the second-largest country in Africa by population, and M-Pesa is expected to thrive given the country’s large unbanked population.
The government had largely closed the economy to external investors but started relaxing the stance in 2019 through the economic reform agenda, with the support of the International Finance Corporation.