When Safaricom became the dominant player in mobile money transfers, after the emergence of M-Pesa in 2007, Kenyan banks supported the move while secretly developing mobile banking services of their own. 80 percent of the population on the continent had no relationship with a bank at that time.
Safaricom, one of the largest telcos, took the lead. By June of 2014, Safaricom claimed 26 million M-Pesa subscribers for mobile money transfers. Nearly 121,000 agents covered the country selling and servicing a public hungry for the ease of mobile transactions. Kenya now dominates mobile money transfers across the globe.
President Obama in July 2015 praised the country’s leaders and new financial initiatives. Some of the biggest U.S. companies—Google, IBM, Facebook, General Electric, and Chase Bank—commenced operations in the country. The Brookings Institution just ranked Kenya as #1 in financial inclusion. In August of 2015, Vodafone and Safaricom were #1 on Fortune’s Top Companies Changing the World.
Mobile Money Transfers, Banks, and Online Commerce
Recently, Equity Bank and Safaricom started a tariff war negatively impacting customers of M-Pesa mobile money transfers. However, by November 2015, the Kenya Bankers Association (KBA) said transaction costs may drop as they roll out what is tentatively called The Switch, a new banking transaction system to fight Safaricom’s well-established M-Pesa.
Kenyan banks have watched account deposits and balances plunge due to mobile money transfers through Safaricom. Of the 2.5 million daily mobile transactions, Kenyan banks only process 3.2%. The war is on. Bankers are mad.
And it’s not only Kenya’s banks.
- MTN, the largest South African telco, which tried entering Kenya since 2008, has forged a relationship with Millicom, an online mobile company under its Tigo brand.
- PayPal has partnered with MailForAfrica to offer secure transactions to the 60% of 26 million Kenyans who shop online.
Although, as a blogger at Kopo-Kopo that provides merchant services recently remarked, payment technology doesn’t sell itself. 92% of all merchants in Kenya still prefer cash instead of mobile money transfers. Digital technology is “disruptive” and costs money; cash is free. Merchants, like consumers, need value propositions that clearly show the advantages of changing how money moves. Unlike what many Silicon Valley leaders believe, technology alone is not the sole solution, especially on the African continent, and even in advanced countries like Kenya.
Despite Kenya’s economic expansion and adoption of mobile technologies, unemployment averaged 22% between 2009 and 2011, reaching 40% in 2011. Kenya’s economic prosperity still tops the list compared to other African countries; but, as a Kopo Kopo blogger wrote, it might explain some of the resistance to financial technology instead of cold hard cash. Something to keep in mind as we continue watching Kenya climbing the ladder of prosperity.
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