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Innovation in the mobile money sector is coming from non-telecom companies. Two new platforms launched this year in Kenya are experimenting with new e-commerce features for individuals and companies. Will the new services reduce the number of Kenya’s “unbanked” population?

By Dinfin Mulupi

In 2007 Kenya pioneered the banking business with the introduction of M-Pesa, the mobile money-transfer service that revolutionized banking. Five years later, four mobile operators (Safaricom, Airtel Kenya, Essar and Telkom Kenya) dominate the market, each offering an independent service to retain customers. In a sign that opportunities still abound despite this competition, two non-telecom companies have unveiled mobile-based financial services this year.

The mobile-banking sector has created thousands of jobs through the hiring of agents and brought millions of previously “unbanked” Kenyans to the formal banking sector. Populations in rural Kenya and remote areas like the North East have limited access to banking services due to insufficient branch networks in their locations. Mobile financial services offer efficiency and are time and cost saving for people who have to travel long distances to access a physical bank branch. The introduction of new platforms has the potential to extend the benefits of mobile banking to more Kenyans.

Investors have pumped billions into new platforms that tout additional services such as agency banking and enhanced security features. The two new platforms – Tangaza and MobiKash – will likely mean that more Kenyans without bank accounts will gain access to mobile banking services. One notable feature both platforms share is that their agents will also serve as banking agents. Kenya’s Central Bank Governor Prof. Njuguna Ndung’u has praised the arrival of new platforms for their role in increasing downward pressure on transactional fees charged to mobile banking customers.

Competition and new services

Tangaza, a platform unveiled by Mobile Pay Limited in January, allows customers to use mobile money transfers without necessarily having a mobile phone; they link to their account using a SIM card.
Tangaza also enables customers to send or receive money from any of the four mobile operators. Mobile operators have been using the sheer number of their agents as a competitive advantage, such that an operator like Safaricom would automatically attract more customers due to the fact that it has more than 11,000 agents countrywide. Despite the recommendations from the Central Bank of Kenya that operators share agents, Safaricom’s CEO, Bob Collymore, argues that it would kill innovation. In contrast, the Tangaza platform is leveling the playing field by offering services to customers from any of the four operators.

So far Tangaza has attracted 120,000 customers and 1,100 agents across the country. “By early next year we would like to have at least one million customers and about 12,000 agents. Once we have agents on the ground we are now going to power systems to give opportunities to Kenyans to access various services such as loans from commercial banks,” said Mobile Pay Limited Managing Director Oscar Ikinu.

Tangaza is roping in commercial banks in a bid to have its sales agents serve as bank agents in order to bring banking services closer to the people. “We already have Kenya Commercial Bank connected to us and talks are underway to bring on board more banks,” said Ikinu. Kenya Commercial Bank is the country’s biggest bank by asset and branch network.

Introduction of mobile commerce

Launched last month, the other newcomer, MobiKash Afrika Limited, is Africa’s first mobile commerce platform. The platform is offering a wide range of financial services including money transfer, mobile banking and mobile payments. MobiKash has already rolled out more than 400 agents countrywide and has contracted with more than 3,000 agents who are expected to begin operations in coming months.

The MobiKash platform is expected to push access to banking services among Kenya’s rural communities. The platform allows customers to link up to 15 bank accounts to their mobile wallet. To bring the unbanked and semi-banked (Kenyans who have mobile money accounts but lack real bank accounts), to the formal banking platform, MobiKash also offers a universal bank account, dubbed POPOTE, through which customers can open an account in any of its partner banks. Currently the platform is connected to three banks: Post Bank, National Bank of Kenya and the Trans National Bank.

According to Duncan Oduor Otieno the firm’s CEO, MobiKash allows one agent to seamlessly serve all the banks in the market with one single process and one single agent, thus offering real interoperability between various players in the financial and payments industry.

So far, the platform has registered 67,000 customers. “Our target is to have up to 300,000 subscribers in six months. In three years we hope to have five million subscribers,” said Otieno.

MobiKash seeks to push the frontiers in e-commerce and, as Otieno puts it, “mop out” physical cash from the market. He says this will reduce government spending on printing notes, an idea the Kenyan Minister for Information and Communication Samuel Poghisio supports.

“The MobiKash innovation will lead to a reduced volume of currency printed and an increased speed in the flow of money within the economy,” says Poghisio. “Encouraging the unbanked to actively participate in the electronic financial environment will reduce the paper currency in the economy and lead to less need to print and replace old currencies.”

According to the minister, the platform will also lead to regional and national economic growth due to the increased access to advanced financial services by those who need it the most -- the unbanked and semi-banked. Since traditional barriers to commerce like access, cost and time have been eliminated, he says, economic growth is set to hasten with independent, real-time and unencumbered access to financial services.

“MobiKash will assist in deepening of financial access and this will have the added advantage of transitioning the informal sector to the formal sector and thus resulting in better collection of financial data which in turn adds in economic and tax planning,” said Poghisio.

Possible job cuts?

Although the platforms offer numerous opportunities in bringing banking services closer to the people, the possibility exists that they might stifle job creation. For example, the fact that one of the MobiKash agents will have the capacity to serve all the 46 banks operating in Kenya poses a threat to thousands of jobs created by mobile money and agency banking.

“We want to create efficiency and sustainability.  We don’t want everybody to be an agent. We will spur the creation of sustainable jobs and stimulate economic growth,” said Otieno.

So far, the two platforms combined have added 4,500 jobs through the hiring of agents. And both say they plan to increase this number.

Dinfin Mulupi
is a business journalist based in Nairobi, Kenya. She is currently the
East Africa corresp for an online business paper based in Cape Town in
South Africa.

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