In the Equity-Airtel deal, the lender will make available cash transfer services, disburse loans, offer data-, voice- and mobile-transfer services across all networks. To be in readiness for this venture, the bank has increased the capacity of its system to host more than 150m accounts and support 1m transactions per second.
Should all of Equity Bank’s account holders join the bank’s mobile services, the bank will become M-Pesa’s second main competitor. M-Pesa currently has 17m subscribers depositing some $1.06bn. And these services will not be limited to the Kenyan market alone as Equity has indicated that it intends to expand the service to cover South Sudan, Tanzania, Uganda and Rwanda, where it has branches, and Bharti Airtel has an impressive reach.
It is with this perspective that Equity’s latest move is being seen as a game changer in the region as the lender seeks greater control of the electronics payments and mobile banking share. Bharti Airtel, which has presence in all of EAC, is also seeking to boost its presence further and cement its position in the region. In short, it is a convergence of convenience.
According to a 2012 study by the United Nations Conference on Trade and Development (UNCTAD), Mobile Money for Business Development in the EAC, the region leads the world’s mobile money market.
Currently, there are 15 different mobile operators in the region and Kenya still leads its mobile money penetration with a 60.5% coverage. Stiff competition will not just be limited to the mobile money market but will extend to the reach of banks and coverage areas of the telcos regionally. At present, Safaricom controls 75% of the Kenyan market with Airtel coming in second and Orange and Yu-Mobile following. The combined mobile subscription in Kenya currently stands at 30.5m.
Uganda has 18.3m mobile phone subscribers and five mobile operators, notably MTN, Airtel, Smart Telecom, Orange and UTL. MTN and Airtel share 80% of the market. Tanzania’s mobile bazaar has a total of 27.3m subscribers. Of these, Vodacom is the market leader with 10.3m subscribers, followed by Bharti Airtel, which has 9m customers and Tigo third with 6.2m subscribers.
In Rwanda, which has MTN, Tigo and Airtel, the overall mobile subscription has now reached 6.03m, with MTN at the pole position controlling 60%, followed by Tigo’s 32%, and Airtel wraps the Rwandan market with the remainder. Burundi tags along with 2.9m subscribers. The profits involved in the mobile money market are a magnet to any savvy business entity. As of March 2014, M-Pesa revenues had reached $305.2m.
New entrant stirs it up
Raising the competition to fever-pitch levels is the entry of the new kid on the block, Smart Telecom. It has already rolled out its services in Uganda and Tanzania with plans to enter Burundi.
Smart Telecom is owned by Kenya’s Industrial Promotion Services (IPS), which is the infrastructure and industrial development arm of the Aga Khan Fund for Economic Development (AKFED), and has indicated that it plans to invest some $300m across the three EAC member states to improve its cellular market share.
This could be a start of a long-term strategy, as under the flagship of AKFED is Diamond Trust Bank, which has a presence across the region. It will not be surprising if, in future, Smart Telecom launched a region-wide mobile money transfer infrastructure platform based on the current trend.
All these developments are not good news for well-established banks and telcos resting on their laurels with no new innovative ideas and apps. The East African region is proving to be a roller coaster of ideas driven by consumer needs. Lethargy in business seems to be quite costly if the current events are anything to go by.
Equity Bank’s partnership with Airtel is yet another pillar in Kenya’s claim to ‘Silicon Savannah” status and it underscores the economic potential of technology convergence in facilitating financial access.