Kenya's mobile innovation brings digital money closer

Mobile banking from Equity Bank could give the popular M-Pesa payments platform a run for its money

Kenyan financial services heavyweight Equity Bank is planning to roll out mobile banking services in July, using innovative paper-thin SIM technology.

Technology of Business

The bank will provide its account holders with slimline SIMs that they can lay on top of their existing mobile phone SIM cards.

This will allow customers to maintain their existing phone numbers and services, but give the bank access to the phone menu and ensure that banking transactions are secure.

The "mobile virtual network" banking service will piggyback on existing infrastructure provided by leading telecommunications firm, Bharti Airtel.

Market shake-up

With more than eight million customers, Equity Bank is Africa's largest bank by customer base.

The company is hoping that mobile banking will help attract new customers and encourage more transactions.

It is likely to shake up a market that has been dominated by Safaricom's well-known M-Pesa mobile money transfer platform.

M-Pesa now has more than 18 million active users, but Kenyans also use rival services such as Zap and yuCash.

Equity Bank entrance Equity Bank hopes mobile banking will win it new customers and encourage more transactions

Describing its traditional competitor as "the mattress" - in other words, the place where people hide their cash - Equity Bank's chief executive James Mwangi sees its mobile offering as key to breaking down barriers of access and distance that hamper banking in Africa.

"The biggest problem with accessing a bank is not bank charges, it is the cost of access," he says.

"I will have to go 70km to where the bank is; I will have to pay public transport; I will have to spend the whole day to get to the bank; I have to dress because I have to go to the biggest shopping centre in my district; that is what will be removed," he says.

Equity has been looking to launch the technology since the regulator, the Communications Authority of Kenya (CAK), granted Equity's subsidiary Finserve - along with two other companies - a Mobile Virtual Network Operator licence in April.

The bank, which has customers across East Africa, is also hoping to benefit from Airtel's regional reach - the Indian-owned company operates in 17 countries across Africa, including Uganda, Rwanda and Tanzania.

"It is really the issue of affordability," Mr Mwangi says. "If we really want the masses and the low-income people to join banking, then we should make financial products very affordable, and that is the value proposition that we are making to the market."

Opposition

It will not necessarily be a smooth ride, though.

Equity is facing a court case brought by a consumer lobby group, which is disputing the award of the licence.

And this week, Safaricom, which provides mobile money transfer services to nearly half of Kenya's population, wrote to the CAK questioning the security behind the technology.

But some analysts see the move as positive for consumers.

"They do have the skill, they do have the integrations, and they're providing many more capabilities on a mobile device than Safaricom can do at the moment, being a bank as well," leading Kenyan technology blogger Moses Kemibaro says.

"It's exciting as it could potentially shift the power base from Safaricom to themselves in certain respects. For the consumer, having alternatives as opposed to one provider is really a great thing."

Going cashless promotes customer security, the bank argues, and also helps to remove the risks associated with cash management.

Mobile payments and banking services are spreading throughout Africa, with the likes of Nigeria's fast-growing Paga targeting the country's 120 million mobile phone users.

Digital transport

Other businesses in Kenya are also looking to benefit from a cashless model.

In particular, Kenya's famously chaotic matatus, the name used locally to describe the minivans and buses used widely by commuters, are moving to cash-free fare payments.

Two men boarding a green painted minibus in Nairobi Thousands of Kenyan commuters use the brightly painted, crowded matatus every day

"We are trying to use technology to make our lives easier, and make our issues with handling cash become history," says Simon Kimutai, chair of the Matatu Owners Association.

"We know very well that there have been many issues with [cash] - [for example] the money is used to bribe policemen."

At least three companies provide the transport cards that travellers can top up and tap in with when they get on a bus. Conductors carry handsets to process the transactions, which can be monitored from the company headquarters.

George Wanyama, manager of MOA Compliant, one of the bus companies piloting the cashless system, says that revenue has gone up 30% in the two months since it was launched.

Other cashless payment systems include BebaPay from Google and My1963 from Fibre Space.

Tap to Pay logo in bank branch With one of these "tap to pay" cards from BebaPay, Kenyans can now ride on matatus cash-free

The National Transport and Safety Authority (NTSA), Kenya's transport regulator, had set a 1 July deadline for the switch to cashless fares.

But only 2,000 out of the 20,000 vehicles operating across the country were reported to be compliant a few days ahead of the deadline, forcing the regulator to relax the rules temporarily.

"Some operators are compliant while others are not. We will be flexible to allow use of cash in the meantime," said NTSA director general Francis Meja.

And if these cashless developments succeed, Kenya's innovation could serve as a model for other countries in the region.

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