Cofek’s fight with Equity bad for business

Kenya: When the Consumers Federation of Kenya (Cofek) went to court seeking orders to cancel the Mobile Virtual Network Operator (MVNO) licence issued to Equity Bank through its subsidiary for mobile services, Finserve Africa Limited, it seemed the idea was about more than getting justice for the consumer.

The action was not consistent with the catchphrase often used by the downtrodden: “having one’s day in court”. For a long time, the courts have been exalted as the place where little guys stand up to big, powerful corporations and aggressors.

But the law, as someone once suggested, can be an ass and in the corporate world, the halls of justice, rather than shielding small or defenceless people, can sometimes be turned into a weapon to assault the very ones who are downtrodden.

According to reports in the media, Cofek through lawyer Henry Kurauka argues that the Communications Authority of Kenya (CAK) did not follow the right procedure in issuing the permit to Finserve Africa Limited and two other firms, Zioncell Kenya Limited and Mobile Pay Limited.

According to the plaintiff, CAK and the three companies did not conduct proper information and public education to enlighten consumers on the risks of engaging in mobile money transfers.

A key component of the evolution of communications services remains access to mobile banking services, with the latest Communications Authority of Kenya (CAK) report showing 26 million subscribers have so far been connected to mobile money transfer services. Safaricom leads with the lion’s share of the subscribers, commanding more than 80 per cent of the entire market.

That is why when news broke that the regulator had awarded Tangaza Pesa an MVNO licence alongside Zioncell Kenya Ltd and Equity Bank, through Finserve Africa Ltd, Kenyan consumers breathed a collective sigh of relief.

The joy was not because people were unhappy with Safaricom. Through its M-pesa platform, the country’s biggest mobile operator has revolutionalised the way we do business and pay for nearly everything in this country, and offered us a better alternative to carrying cash.

But business is dynamic and the best way to extract value for consumers is to offer variety.  M-pesa is facilitating business but does not offer us this variety. It is time to open up the mobile money sector and offer other alternatives.

This is the only way to reduce the costs per transaction.

Already, Equity Bank has unveiled plans to lower the cost of mobile money and mobile banking fees. The bank’s proposed rates are comparatively lower than current market rates.

Mobile money transfers will cost anything from one shilling to transfer Sh100 to Sh25 for larger amounts on Equity’s platform. Currently, M-Pesa charges Sh3 for the smallest transfer of Sh10. It costs Sh110 to send Sh70,000 and Sh330 to withdraw, bringing the total transaction cost to Sh440.

I believe other more interesting and beneficial innovations will follow in the mobile money market, but we will not benefit from such advancements if the market is a monopoly.

Actually, it has been proved in other markets that intense competition breeds innovation and helps to lower prices. But Kenya will not benefit from all this if we don’t open up the mobile money market to competition.

The only hope is that the courts will be the people’s defence against any forces that try to stifle competition in the mobile money market.

Consumers must be allowed to pick from as many operators as possible. This is the only way to lower the costs of doing business. It will also afford us opportunity to know whether we are getting good value for money or not.

The licence granted to Equity Bank, Tangaza Pesa and Zioncell allows them to issue customers with branded Sim cards and provide services similar to those offered by mobile service operators like M-pesa. Their services will be anchored on Airtel Kenya’s network.

Of the three new licensees, only Equity Bank has the nationwide network, financial ability and customer base to challenge Safaricom’s market dominance in the mobile money business.

The bank has come out aggressively and if what we read and see in the media comes to pass, will offer serious challenge to M-pesa and any other forms of mobile money transfer services. This will be good for consumers and if indeed, Cofek’s duty is to bid on behalf of consumers, it should support Equity Bank and any other company seeking to offer consumers a variety in mobile payment.

There is need to sit down and urgently reflect on the situation at hand. Rushing to court to litigate frivolous matters will not open the avenues we need to create a dynamic banking and telecommunications sector.

The writer is a Public Affairs and Policy consultant