Is it the end of a long winding road for M-Pesa?

If the regulator, CA fully implements the report, then Safaricom and M-Pesa will operate as two entities with different staff and infrastructure.

 

If put to use, the report suggests that M-Pesa service, the major earner for Safaricom, will totally be delinked from its current service provider, meaning that it will have its own staff, be differently branded, have a separate accounting and information management system. The service, however, will legally belong to Safaricom Limited.

Earlier, the regulator CAK contracted an international consultant firm Analysys Mason to get appropriate legal framework for regulating abuse of market dominance and anti-competitive behaviour dating back to 2010.

“The two businesses would be required to operate in separate offices, with separate staff below board level, separate branding, separate accounting and separate business operations and support system, customer support systems and management information systems,” the report says, as quoted by Nation.

On his part, Safaricom Chief Executive Officer Bob Collymore, said he had not seen the report but was saddened by the recent developments in the mobile money business.

"I am pretty hostile to the idea. We can't have other people dictating whether we break up our company or not," he told the Nation.

Fees disclosure

In the recent past, the mobile money transfer business has been on the spot, earlier accusation directed to Safaricom linking it to concealing transaction charges related to sending and withdrawals, prompting the court to compel the service provider to include a transaction charge notification at the end of every transaction.

The company mid of this month began disclosing M-Pesa fees after the completion of transactions. Since then, customers who use M-Pesa to pay a bill or transfer cash are get a notification of the fees associated with the transaction in an SMS.

Safaricom’s compliance is one year behind the CA’s directive that was issued last year. In common practice, customers are supposed to receive warnings on how much a transaction will cost before they confirm the payment. The telco says this real-time notification system will be implemented in upcoming phases of the project.

“In the second phase, customers will receive a pop up message informing them of any charges prior to the transactions,” Safaricom said earlier in a statement.

The final phase, the company said, will see Safaricom effect changes to its system so that users of value-added services such as M-Shwari and M-Tiba can receive similar notifications. The changes will have to be done by the end of May, in line with CA’s deadline.

The anti-trust watchdog, CA, last year ordered all financial institutions and telcos providing mobile money services to begin disclosing fees associated with such services to customers. The order was meant to remedy the opacity that surrounded such fees.

Customers who wanted to find out the cost of transactions often had to rely on posters at agency shops, the Internet or simply calculate backwards based on their mobile money account balances. Safaricom now becomes the second telecom firm, after Airtel, to begin making the disclosures.

Tight regulations

The regulator, CAK, has also shown particular interest in regulating the mobile money business, dominated by Safaricom’s M-Pesa.

Although the proposals by the consultants are still far from being implemented and will have to be discussed by stakeholders before being introduced, they are bound to raise concern in the Safaricom boardroom.

Related content:

Report recommends higher level of interoperability in the market by December 2017 or Safaricom be forced to hive off M-Pesa into a separate company

Competition

The stability and ultimate dominance of M-Pesa faced yet another setback last week when the Kenya Bankers Association (KBA) launched PesaLink. The service, which will enable a transfer of cash up to Sh1 million, will also enable 12 local banks to interlink, denting a huge chunk of M-Pesa’s customer base.

KBA’s Chief Executive Officer Habil Olaka said that the 12 partner local banks will enable transfer of between Sh10 and Sh1 million in a move set to compete with existing money transfer services. Already the service is gaining pace in the money transfer scene.

Safaricom Limited netted in 669,594 new subscribers in the three months ended last September, hitting a new mark of 25.94 million users; despite a drop in the number of mobile users by a whopping 1.2 million.

The drop in total mobile phone subscriber base from 39.7 million reported in June to 38.5 million as at end of September 2016 was punctuated by Telkom Kenya’s revision of its customer count to include active users only, hitting Safaricom the hardest.

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