Money Chasing Mobile: The Threat of Telcos’ Mobile Money to Banks and Card Companies in East Africa

equitympesa2In early March, in an unusual collaborative move, Kenya’s two largest telecoms operators, Safaricom (66.5% market share) and Bharti’s Airtel (17.5% market share), made a joint $100 million bid for the third largest operator, Essar Communications, YuMobile (8.1% market share). Media reports claimed the two would split the spoils; Safaricom would take up Yu’s infrastructure network and Airtel Yu’s 2.7 million subscribers, boosting its market share up to 25% from 17.6%. Reports suggested that Equity Bank had expressed interest in rolling out mobile services and YuMobile’s existing network offered an enticing option. Equity Bank, the largest bank in the region, boasting 8 million customers, is hailed for reining in small and rural customer deposits in its inception years, catapulting it to the helm of the financial services industry. Nakumatt, Mobile Pay and Zioncell were also mentioned as showing interest. Orange, the smallest player by market share (7.1%), is speculated to be planning a wind up of its operations; a move likely to shake up the industry in this region.

Kenya is widely recognized as a model case for mobile banking impetus, apparent from its

An Mpesa Agent with a User in Kenya

An Mpesa Agent with a User in Kenya

ubiquitous mentions at conferences and conversations on the same. 18.6 million registered and 11.6 million active users, a larger base than any other banking institution in Kenya. See more facts here. Concerted efforts to replicate this model of financial inclusion in neighboring Somalia and other developing countries, was actualized with relative success. Zaad, a mobile money service offered by Telesom, the largest mobile phone company in Somalia, averages 34 transactions a month, higher than most places around the world. Bringing in the unbanked population into the formal financial system has far reaching desirable impacts for governments and central banks. Mobile banking has effectively allowed developing economies to leap frog traditional brick and mortar models of banking and achieve a more inclusive financial system – faster. [Read more…]