Safaricom CEO Bob Collymore. The telco said it would drastically cut fees for smaller transactions on its M-Pesa, as it prepares to head off competition from Equity Bank’s new rival service. [PHOTO: FILE/STANDARD]

It will now cost less for those sending up to Sh1,500 using Safaricom’s M-Pesa platform. This follows a 67 per cent reduction in charges for sending cash of any amounts between Sh10 and Sh1,500.

This means the cost of sending Sh1,500 falls from the current Sh33 to Sh22.11. However, this is where the good news ends.

Those dealing in amounts higher than Sh1,500 will be charged 0.8 per cent of the transaction value. For instance, those intending to send Sh10,000 will be charged a fee of Sh80, up from the current Sh55. While the new tariffs favour those who send cash through M-Pesa in lower denominations, it is those sending more money that will be hardest hit. This could be a classic case of robbing Peter to pay Paul.

Safaricom is introducing these new charges at a time when rival Equity Bank is putting in place final plans to enter the cash transfer business, using Thin SIM card and handsets. Equity Bank raised the stakes in the telecoms market with the announcement that it would charge a 1 per cent fee capped at Sh25 when it launches its services. It still remains to be seen whether this price differentiation will dislodge Safaricom from its long-held dominance of the mobile cash transfer business.

Cashless economy

Under the new tariff structure, which is set to take effect tomorrow, the mobile operator has scrapped the constant charges levied on money transfers above Sh1,500.

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Safaricom has been at loggerheads with the competition authority in recent months, after rivals accused the mobile phone company of engaging in unfair practices to lock out the competition. This matter has now been resolved with M-Pesa opening its doors to the competition.

“We have spent a considerable amount of time analysing M-Pesa usage trends and we have established that over 65 per cent of all M-Pesa person-to-person transactions are within the Sh10 – Sh1,500 band. It is our belief that by lowering the cost of these transactions, we will provide an increased number of Kenyans with affordable access to basic financial services,” said Bob Collymore, the company’s chief executive.

“Our financial services portfolio now contributes close to 20 per cent of our overall revenues and pushing through a tariff reduction of this magnitude is an expression of confidence in our longer term strategy to drive the growth of a cashless economy that delivers financial inclusion to millions of Kenyans through the convenience and affordability of our financial products.”

In a statement yesterday, Mr Collymore explained that withdrawal tariffs as well as transaction fees for Lipa Na M-Pesa and all other tariffs would remain unchanged, following the tariff review.

Safaricom’s tariff review also comes as the company prepares to move M-Pesa’s backbone infrastructure from Germany to Kenya, in an investment that is expected to open up more opportunities for cashless transactions within the country. M-Pesa was introduced in 2007 and has grown to include over 19.3 million customers, which is more than 80 per cent of the country’s adult population.