Let me define here what flavour of “mobile money” that I am talking about. This is stored digital value that is held in the cloud (not on the device) – a digital wallet. Funds can be transferred peer-to-peer, peer-to-merchant and even across borders. When it moves beyond our Kenyan borders, it typically lands in the wallet of another money transfer operator e.g. MNO, but it may also go to a cash-out kiosk.
The elephant in the room is MPesa, run by Safaricom, our leading mobile network operator. “Pesa” is money in Swahili. It is estimated that about 80% of Kenya’s GDP flows through MPesa. I typically have more funds in my MPesa account than in my physical wallet. It is convenient to use as I can transfer funds to individuals, pay for goods and services and even credit my bank account.
MPesa is not the only mobile money that exists. There are others such as Airtel Money run by Airtel and Equitel which is from Equity Bank.
So different postulations exist on why mobile money took off here with a bang. Some say it is because the post election violence of 2007-2008 created a problem in fund circulation (Mpesa was publicly launched approximately at the beginning of 2007). Others say it is because of the dominance of Safaricom as an MNO – they commanded probably over 90% of voice traffic in the country at some point.
One of the reasons I see is that there was a lack of a convenient means to move funds around. We did have the traditional Western Union and others in place though. But these were not affordable for everyone. Moreover they had outlets in fixed locations. Internet banking was unheard of, and Android and iPhones were yet to become widespread.
The lucky thing is that for a long time, MPesa was unregulated. At some point it raised the eye brows of banks who went to challenge its legality. It had begun to compete with their products. Luckily the Central Bank of Kenya Governor allowed for it to continue, with a new framework of regulation. Strictly speaking it does not puport to offer banking services, for example gain interest through deposits. This can only be done in conjunction with a bank.
Actually till now you can say it’s the unofficial money switch in Kenya. It remains to be seen whether the newly launched Integrated Payments Services Ltd (IPSL) by the Kenya Bankers Association (KBA) will have a dent on MPesa.
I can say the chief reason that the service won’t succeed as much in other African countries is because regulation has come in before innovation. I was seated at an office of an unnamed MNO in Nigeria in 2016 listening to their strategy on mobile money. They said that *they* wanted to be the gateway for all mobile money in the country. And the same argument is there with other money service businesses.
The government and other stakeholders have already seen the big pie in East Africa, and have put many regulations that hamper its success. It flew under the radar in Kenya for a while till regulation caught up. The infighting among the stakeholders in some other African countries has clipped the wings of a hatchling.
Let us see where matters evolve over the next 5 years. At the moment there is debate at the regulator level that MPesa is too dominant and needs to be broken off from Safaricom.
