The Central Bank of Kenya (CBK) has launched a fresh review of the national payment system that will force Safaricom to offer rivals access to its vast network of mobile money outlets for seamless transfer of money among the telcos.
The proposals are contained in draft rules that the CBK released Wednesday for public input in a review that could threaten Safaricom’s dominance of the mobile market.
Under the plan, the regulator is pushing for cross-network mobile money transfer service that allows users to withdraw cash from an agent of their choice irrespective of whether they belong to Safaricom or Airtel.
Airtel subscribers will also be allowed to pay for bills via Safaricom’s Lipa na M-Pesa in the latest push to increase the penetration of mobile money services and deepen financial inclusion in the country.
Since 2018, users can send money across mobile phone networks, but they can only withdraw cash from agents associated with the operator.
The CBK is now seeking to break the agent hurdle, a proposal that look set to irk Safaricom.
“This will enable users to affordably access their stores of value from different channels and providers so as to seamlessly pay for goods and services and facilitate economic activities,” says the CBK report.
“Though the industry moved to enable interoperability of mobile wallets in 2018, this is limited to only P2P (person to person) payments, and is yet to be expanded to both merchant and agent interoperability and even to work seamlessly at P2P.”
Safaricom has been uncomfortable with the push to open its mobile money outlets to rival firms, arguing it would expose its lucrative M-Pesa mobile money platform to stiff competition.
More than 30 million people in Kenya use M-Pesa, which besides allowing users to send cash and make payments by phone, they can also save and borrow cash.
Safaricom had 215,367 mobile money agents at the end of September, leaving rivals to control the remaining 47,833 outlets. This market structure discourages M-Pesa-to-Airtel money transfer, which is also expensive to those sending money cross-network.
It costs Sh56 to send Sh3,000 on the Safaricom network, but the cost rises to Sh112 for sending from M-Pesa to Airtel.
Safaricom’s Lipa na M-Pesa merchants grew by 76.7 percent to 126,862 in the review period.
Safaricom’s Lipa na M-Pesa service has risen to take an 85.8 percent market share of non-cash payment for ordinary goods and services, underlining the entrenchment of the mobile money platform in everyday transactions.
The telco disclosed that the service processed deals worth Sh404.8 billion in the six months to September when payments on point of sale (POS) machines using credit, debt, prepaid and charge cards stood at Sh66.8 billion, according to data from the CBK.
Analysis of M-Pesa’s market share in cashless consumer payments excludes cheques and Real Time Gross Settlement (RTGS) system which is mainly used to settle high-value business-to-business transactions.
Rival firms have struggled to cut M-Pesa dominance amid calls to compel Safaricom to separate its widely used mobile money business from its telecoms unit due to its dominant size.
Safaricom’s rivals- have long demanded that the Communications Authority of Kenya (CA) act to curb Safaricom’s dominance. Safaricom denies allegations of abuse of dominance. Telkom and Airtel’s bid to merge to take on Safaricom’s might collapsed.
Lipa na M-Pesa was launched in June 2013 and has aggressively recruited merchants, including large and small businesses such as fuel stations, supermarkets, corner shops and eateries. This has seen it overtake the card payments – run by banks and their global payments technology partners such as Visa and Mastercard — that have largely focused on serving formal retailers.