Equity’s free cash transfer is here, what does this mean for consumers?

Nairobi; Kenya: Equity Bank’s Thin SIM will hit the market in a fortnight, a move expected to ignite competition in the Safaricom dominated mobile money transfer segment.

The bank, through its subsidiary Finserve Africa Limited, is entering the telecoms market using its Equitel brand. What has made its entry interesting is the Thin SIM technology, which it’s employing to address the typical Kenyan subscriber’s low tendency to switch providers due to the utility of value-added services such as mobile money.

“Majority of Kenyans can only afford a single-SIM mobile phone, which they use as a primary line. The slim SIM card is a 0.1mm-thick film that is placed on a subscriber’s original SIM card, effectively turning the device into a dual-SIM phone,” said Leonard Kore, a research analyst for telecommunications and media at IDC East Africa.

“This enables users to enjoy the services of two mobile network operators (MNOs) or mobile virtual network operator (MVNOs) concurrently and potentially save on the purchase of a dual-SIM phone or a separate phone to enjoy another network’s services. It will also ease the stress of switching SIM cards for users who only have a single-SIM phone, as is predominantly the case.”

James Mwangi, Equity Bank Chief Executive Officer says the SIM cards have been shipped and would be made available to subscribers in the next two weeks. The bank, the largest lender in customer numbers, has already given out 200,000 ordinary SIM cards to customers across the country on a pilot phase.

However, it is the revelation that Equitel will not charge subscribers to send money on its mobile banking platform that will likely stir market wars. Safaricom, Kenya’s largest telco, charges its customers between Sh1 and Sh110 to send cash on M-Pesa.

Also, Equity Bank has capped the cost of withdrawing any amount at Sh25, compared to between Sh10 and Sh330 charges on M-Pesa. This could set the stage for a price war bound to see the cost of money transfer reduce significantly, with consumers standing to be the biggest winners. Equity Bank is preparing a national launch for its mobile money transfer service Equitel despite protests from Safaricom on the basis that the thin-SIM technology has the ability to quietly steal data from the main SIM, including the secret personal identification numbers and pass them on to a third party.

But Mwangi says data transmission will be encrypted, and hence the fears are unwarranted. Despite his assurances, two court cases have been filed in an attempt to block Equity’s Thin SIM technology from taking off.

Knock-on effects

The Communications Authority of Kenya and the Central Bank of Kenya have given Equity the go ahead to launch the technology. But the parliamentary committee on Energy and Communications directed that the commercial launch of the overlay SIM-card be halted until ‘a technical audit’ of its security features is carried out.

Peter Wanyonyi, a telecoms analyst thinks the Thin SIM move is a big winner for both Equity Bank and for mobile money consumers in Kenya. “First, there’s the technology —the move significantly expands Kenya’s technology foundation in mobile money, and I fully expect to see knock-on effects as more mobile apps and services are developed that utilise Thin SIM technology,” Wanyonyi said.

Secondly, he says the mobile money business has largely been dominated by one operator that has essentially charged anything they wanted for the service. “Equitel is bringing in much-needed competition given its massive customer base. That sending money will be free on Equitel is the real game-changer here, and it will have repercussions not just in the mobile money market, but also on the ATM scene: withdrawing money from an ATM is quite expensive in Kenya,” he adds.

“Free Equitel money transfer means more customers will quickly opt to use the service to send money, rather than be charged for both sending and receiving on other mobile money transfer services, or paying for ATM withdrawals.”

Equitel has not yet revealed its merchant lineup, but one expects that behind the scenes they are working to develop, test and commission payment systems with supermarkets and other retailers - perhaps even public transport vehicles.

“This is good for the market, good for the consumer, and therefore good for the economy.”

The bank has always hoped to go big on mobile phone banking to deliver financial services to its nearly nine million account holders.

Its bid to partner with mobile phone operator Safaricom to launch M-Kesho fell flat. The venture was largely unsuccessful due to complications in revenue sharing and business models between it and Safaricom. Safaricom went ahead to partner with Commercial Bank of Africa to launch a similar product—M-Shwari.

Equity Bank argues that its approximately nine million clients cannot afford the luxury of owning two phones, so a SIM card that just sticks on to the existing card on the same phone makes economic sense.
But, what Equity Bank is going after is Safaricom’s honey-pot—its mobile money transfer business M-Pesa which the latter guards jealously.

Apart from bringing in billions of shillings for the operator, the service acts as a powerful loyalty tool.
Dobek Pater Managing Director Africa Analysis – an ICT consultancy firm told Weekend Business in a recent interview that M-Pesa is the one edge that Safaricom has that might still keep it in the game even with increased competition. “One strong factor that Safaricom has in its favour is M-Pesa, which generates a lot of ‘stickiness’ for the operator. By now, with over 20 million users, and an extensive ecosystem built up around it, it is very difficult for existing M-Pesa users to change networks, which do not offer the same extent of mobile financial transactions (a large community),” he said.

Price competition

Analysts at telecoms research firm International Data Corporation (IDC) say the entry of Equity Bank and other new MVNO players could disrupt the telecom space in Kenya.
“The entry of MVNOs has already sparked industry developments in terms of innovation, improved customer experience, increased competition and price wars, and partnerships between telcos and companies in other verticals. In response to the new players, we expect intense price competition by all operators in order to lure customers,” said Kore.

Safaricom has cut prices on low-end transactions (below Sh1,500 ).

The market could see the entry of an array of MVNO services through partnerships between telcos and other service industry organisations spurring innovation and improving customer experiences.

“The banking industry has been at the forefront of this development, and IDC expects more bank–telco partnerships, mainly to leverage mobile payments and banking value propositions. The local transportation industry could also become a key area for partnership formation in the long term, due to recent legislation on cashless public transport payment systems. Others include the retail and the public/government sectors,” Kore said.