Competition Drives Innovation in Kenyan Mobile Payment Services

April 27, 2009

Safaricom’s mobile money transfer service, M-PESA, continues to succeed — more than 40% of the Kenyan operator’s 13m subscribers use the service, launched in March 2007. There is no doubt that the service is having a positive impact on Safaricom’s business: Despite the entry of two additional mobile operators in the Kenyan market in the past couple of years, Safaricom still has more than 78% of subscribers.

With competition intensifying, the mobile banking and payments area in Kenya has seen a lot of activity in the first few months of 2009 alone. Our recent report looking into mobile payment services in Africa did predict that more sophisticated services would become available, but the pace of development in Kenya has been faster than expected.

First of all, Zain, the second largest operator, finally launched its mobile money service, Zap, following delays in receiving regulatory approval. The service is ambitious: It not only offers domestic money transfer, but also the ability to pay bills and send money to and from bank accounts. Moreover, it is integrated with Zain’s One Network, enabling international airtime top-ups and money transfers.

Orange Mobile and Econet Wireless, the two new arrivals, both recently announced that they will launch mobile payment services. By year-end 2008, the two operators had gained less than a 3% market share combined. More recently, Orange announced it had reached about 700,000 subscribers, but with very low ARPS of €2 (a level that even the CEO mentioned was ‘worrying a bit’), about half the market rate. Econet, the smallest operator, announced already last year that it would launch mobile payments services in partnership with Obopay, although its expansion plans have been set back by the global credit crunch. As yet there are no details about either of the operator’s services, but it appears such services are now a prerequisite for gaining a footprint in the market.

Similarly, the banks in Kenya have been hitting back. On one front they have made strong complaints that Safaricom has an unfair advantage (although it looks like little will come of this, as the government overall wants to encourage the development of mobile banking. The banks have also launched services of their own: Both Family Bank and Postbank recently launched services that let their clients access account details through SMS and buy airtime. Standard Bank and Equity Bank have launched similar services, adding the ability to pay bills and check foreign exchange rates.

Other announcements in Africa make clear the importance of mobile payments, such as MTN’s partnership with Fundamo and Zain’s with Oberthur Technologies, both of which are region-wide and suggest these operators will introduce such services across their footprints. Safaricom, meanwhile, is awaiting approval for an international money transfer service between Kenya and the UK and is also in discussions with utility providers to enable M-PESA users to pay their bills on their mobile phones.

— Jan ten Sythoff, Analyst at large

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