CBK rules out shared infrastructure in mobile money

Digital Content

The mobile banking regulator Central Bank of Kenya (CBK) has spoken out against the proposed sharing of money systems between different service operators, saying it will kill innovation and competition in the sector.

Addressing the AITEC Banking and Mobile Money conference in Nairobi, CBK Governor Prof Njuguna Ndungu criticized the proposal made by Airtel through the Office of the Prime Minister asking that it be allowed to use Safaricom’s Mpesa systems and infrastructure in mobile money transfer.  He instead urged operators to focus on increasing the number of agencies and users.

Nonetheless, he admitted interoperability would help reduce costs, but warned that the blind adoption of infrastructure sharing would stifle innovation and growth in the sector. “These innovations need to be safeguarded and their proprietary rights respected,” he said.

The Airtel proposal would have seen cash transfers sent between different operators and allowed Airtel to use Safaricom’s extensive agency network across the country. The move would have dealt a blow to Safaricom’s market dominance and Safaricom argued that such a move would infringe on its proprietary rights.

Though it is currently possible to send money across networks, the transfer process remains complex and costs 10 times more than the price of sending money within the same network.

Prof Ndungu, who was addressing delegates in a special session, said instead he would be keen to boost the numbers of Kenyans who have access to banked services. “If you do not have the numbers you cannot bring costs down. Let’s have the numbers then start debating how interoperability will reduce costs further, but we should respect proprietary rights,” he said.

Figures from CBK show that the number of deposit accounts in Kenya shot up from 2.55 million in 2005 to 12 million by 2010. About 24 million Kenyans (almost a third of the total population) are also now using mobile banking services.

 “We have to follow the rules of the game but what we want is numbers on the table. Let’s not go for simple choices,” the Governor said.

Mpesa services are one of the biggest retainers for Safaricom subscribers and are seen as the main reason why consumers are not defecting from the network. 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 4 million subscribers. Orange, which runs a mobile money network called Orange Money, has about 100,000 users and 1,500 agents, while Yu runs a mobile money network called Yu Cash.

CBK data shows that following the launch of the partnership between Safaricom and Equity Bank linking mobile money services to a base bank account, 700,000 M-Kesho accounts had been opened by the end of September last year with approximately Sh400 million mobilised.