How Kenyan Banks are fighting off Mpesa

Once upon a time, Kenyan Banks lost to Mpesa. It’s been 7 years, and they have since made a number of strategic moves to win back the market

Banking Agent Networks

Banks have gone out on a spree, rolling out dedicated agent networks of their own and in some cases, even co-opting Mpesa agents as their own. A ruling by the Competition Authority of Kenya in 2014, ordered exclusive agent contracts be scrapped, opening up Mpesa’s agency network to rival firms.

Equity Bank had contracted 22,017 agents, KCB had over 10,000 agents and Cooperative Bank 8,700 as at end of September 2015 according to the Business Daily. Mpesa had 85,000 agents as of August 2015.

Here is a picture of of 4 banking agents next to an Mpesa agent: Cooperative Bank, Equity Bank, Kenya Commercial Bank, Family Bank, Mpesa. And one of an agent serving multiple banks and Telcos

IMG_1768       IMG_1687

Banking Act vs mobile money guidelines

The Central Bank of Kenya electronic money guidelines limit mobile money transactions to low value amounts. Mpesa’s daily limit is capped at 140,000.

On the contrary, because they fall under the Banking Act, Kenyan banks allow their customers to send up to a daily limit of 500,000 in a single day via mobile banking channels.

This clearly sets apart a mobile money account  and a mobile bank account, and the capabilities of both. It severely limits the functions of Telcos mobile money accounts and ability to scale up the banking ladder.

In spite of this, it is still the most commonly used mobile wallet for Cash in and Cash Out (CiCo) functions because of the third point below.

The Gatekeepers SIM

It has always been about the SIM card. Kenya’s Mobile penetration rate stands at 80.5%  and Telcos, own gatekeeper rights to the SIM, and communication channels.

Mpesa and Airtel money run as native SIM applications. Any other financial services provider wishing to offer services via mobile phone is allocated USSD channels instead as a mobile financial services gateway. The user experience and cost implications are nowhere near comparable. Kenyan Banks either have to partner with a Telcos, acquire one or become one

Equity Bank, was first to realize the folly of this model and has over the past 1 year, successfully rolled out Equitel SIM cards to over 1 million subscribers.


Simply put, it is a bank on a SIM card. So, all the possible banking functions can be accessed right from the SIM menu – whether it is a smartphone or dumb feature phone.

I activated mine today, and made a 230,000 KES transfer from Equity bank to Commercial Bank of Africa over a Bank switch within an hour. With this SIM card, I find I can do ALL Telcos functions + ALL banking functions. I love it! For the foreseeable future, this is it, bank on your SIM.

Screenshot_2016-02-23-10-06-27However, I do wonder what this means for the rest of the banks. Clearly, a superior product, will other banks follow suit? Will Kenyans now have a SIM card for all their different banks? Highly unlikely.

Will the SIM be democratized, as an open house for any bank to run its applications? Will Mpesa open up its SIM for other banks to run their application (like it did with CBA’s Mshwari)?

Ideally, Kenyan banks would like to own a digital wallet in users’ phone. The challenge is how to go about it given the present status quo (Telcos). In my opinion, if they can’t get access to the SIM, IP blockchain wallets are a great forward-thinking alternative. I have written about here, as a feasible emerging alternative.




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