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07 March, 2011

Mpesa to enjoy the Monopoly for Now - CBK Governor.

The Kenya's central bank governor,Prof. Njuguna Ndung'u, is against Airtel's latest proposal that aims to harmonise money transfer systems currently offered by mobile phone operators.He argues that this proposal would kill an innovation that has helped majority of Kenyans come into the formal economy.

Prof.Ndung'u believes that even though the Interoperability proposal will bring the cost down,it will greatly affect companies which have proprietary rights to the innovation,affecting growth and competitiveness in the sector.He advised the companies who are lobbying for the building of  a seamless money transfer platform ,that would allow telecoms to merge their functions with M-Pesa, to first build their Customer base before debating how interoperability will reduce costs, until then,he said, proprietary right will be respected.

Airtels proposal which was submitted to the PMs office for consideration  aimed at building a seamless money transfer platform that would allow telecom companies offering money transfer service  merge their functions.It would mean that cash transfers could be sent between networks, as well as allow new telecom companies use agency network of established telecom companies like safaricom to extend their reach, a move aimed at diluting the market leader’s dominance.

Safaricom’s rivals argued that  establishing  a central clearing house would offer them headroom to significantly cut costs  and that such a platform would remove the high cost that is preventing consumers from moving money across networks, but Safaricom argued that the move would infringe on its proprietary rights.
Currently it is possible to send money across networks, the transfer process  costs 10 times more than the price of sending money within a network, making safaricom enjoy a monopoly because of the club effect,Safaricom has 13.5 million subscribers on the service with over 22,000 M-Pesa agents while Airtel, its main rival which operates a mobile money network dubbed Zap has about four million subscribers.Orange, which runs a mobile money network dubbed Orange Money, has about 100,000 users and 1,500 agents, while Yu runs a mobile money network dubbed Yu Cash.
Airtels proposals although Noble, was seen by many as a well thought out scheme to utilise safaricoms billions of  shilling  worth of infrastructure for free.

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