Last year, Kenya opened up the market by legislation to Mobile Virtual Network Operators (MVNOs), basically meaning a mobile carrier can come in and lease infrastructure and go straight into business. Five companies applied for the MNVO license with the Communication Authority of Kenya and were awarded. They included Zioncell, Equitel, Kenya Airways, Tangaza Money and Nakumatt. We are not sure what progress the other four have made but Equitel has been the most visible player.
Equity ventured into the mobile money transfer space with the registration of mobile virtual network operator Finserve Africa Limited that runs Equitel. Since then, Equity has faced several hurdles mostly legal issues. First, Equity planned to introduce its product to the market using thin-SIM technology, whereby a special SIM card, overlays that provided by the competitors or currently in use on a subscriber’s handset. Equity has since clarified that it won’t just be pushing the thin-SIM; it will offer subscribers a choice of SIM cards from standard size SIM, micro, nano and thin SIM based on their requirements. The micro and nano SIM will sell for Kshs 50 with the thin-SIM selling for Kshs 500 inclusive of Kshs 200 airtime. Many argued that this presented issues with regards to privacy of user data. The courts subsequently threw out this claim. Then there were trademark issues with regards to the Equitel name, which we believe were sorted in an out-of-court settlement.
Today, Equity Bank has finally launched Equitel, seeking to bring a convergence between mobile money transfer services and banking. Equity also announced that the number of subscribers has hit 1 million users, with insiders quoting an unconfirmed figure, 69%, as active subscribers acquired mostly through issuing SIM cards for free to Equity Bank’s 8.7 million customers. Equitel has been using the 0763 prefix but it has since been exhausted and new subscribers will now be using the 0764 prefix, as they seek to lock in the next million subscribers. In Kenya, Airtel has been the vehicle of choice for MNVOs. Airtel has for sometime had up to 40% of their capacity 3G and 2G sites unused, making them a good channel to wholesale Base Transmitter Station (BTS) capacity to MNVOs.
Equitel seeks to increase electronic transactions by ensuring customers trade, bank and transfer money easily. Through the new platform, Equitel seeks to eliminate the need for mobile applications in accessing internet banking by providing similar solutions to feature phones thereby increasing financial inclusion. The services are also interoperable with other systems as users will send and receive money on Equitel from other banks as well as mobile money platforms including Airtel Money, Yu Cash, Orange Money and M-PESA. The venture was viewed as a game changer meant to cut down on Safaricom’s purported avarice by introducing lowly priced product offerings.
There is no denying, Equity’s Equitel is a disruptor. But of what exactly?
Mobile Money Services
Safaricom’s M-PESA is without a doubt the nonpareil. M-PESA has 13.9 million monthly users with revenues reaching Kshs 32.9 billion and transactions of Kshs 4.2 trillion done through the service. The world over, it’s regarded as the paragon of mobile money transfer with its model having been tried and tested. Every time we begin to think M-PESA is starting to senescence, Safaricom pulls one on us as has been the case with the Lipa na M-PESA service, better response times and timeliness on M-PESA to bank transactions and M-shwari. I personally believe the price point is a non-issue (Equity, will not charge any fees for its services on its ecosystem). Airtel has through Airtel Money been providing the service for free. Despite having 3.3 Million registered users, only 300,000 are active monthly users.
The services Equitel seeks to bring to the market are already in existence and what the consumers really crave is a solution that really changes things as happened with its banking solution. What is likely to take place is Safaricom lowering its M-PESA transaction charges, as Equitel spells no danger to its business model or revenues. I foresee a situation as foretold by Kachwanya.com:
Even though I have owned Equitel for over eight months, I haven’t used the network to transfer money to an Equitel number neither have I withdrawn money from an Equitel agent. What I have done is that I have frequently transferred money from my Equity Bank account to M-PESA from which I withdraw or pay my bills, and for this and two other reasons, I think Equitel is not really a deal breaker.
Cash is still the principal means through which Kenyans transact and make payments, which has been placed at 90%, meaning there is space for all players including Equitel. So if indeed a disruption is to take place courtesy of Equitel, it is likely in the space of the unregistered. There is still a high number of users out there with no mobile money transfer services, who make payments via cash and still pay for their utilities by queuing. Online payments are still infant, even with increasing usage of the internet. I think that is where the real goldmine for Equitel lies. Chasing Safaricom’s business model is a tumescent venture likely to yield no real gains and the folks at Upper Hill are equally aware. With its extensive mobile money agency, Equity can reach even the most remote of places in Kenya and lock in new subscribers. They can also use them as points of customer service besides using them as a marketing platform.
Equity Bank has managed to propel itself to the epitome of banking in Kenya. It currently has the largest number of consumers and is seeking to replicate the acme in other countries including Rwanda and DRC. In announcing the new proposition, Equitel said “it will not only be able to securely send and receive money on the Equitel network but also from other banks”. In addition, the “new platform eliminates the need for mobile applications in accessing internet banking as even a simple feature phone will work in a similar manner like a sophisticated smartphone further demystifying financial services”.
This is one area we believe, Equitel can disrupt, especially in offering similar packages to the mass market. Most of the banks have been relying on a service by Craft Silicon called Elma. Elma, which launched in 2010,allows users to undertake bank-to-bank transfers, pay utility bills, process from bank to mobile money services for a flat fee of Kshs 80 per month. Safaricom also has a similar offering, which it has been promoting aggressively. By taking the service to the mass market possibly through USSD, Equitel will earn a standard fee for transactions from other banks, while at the same time offer an avenue to promote its other services. It will also make bank transfers easier and cheaper which would be a real disruptor.
Interestingly, Kenyan banks through the Kenya Bankers Association are planning to launch their own mobile money transfer service which will ultimately reduce the dominance of Safaricom’s mobile money transfer service. Currently, M-PESA serves as a channel through which bank customers use to send mobile money to other users. Ideally, one withdraws money from their bank accounts into their M-PESA and then sends the money via the mobile money platform to another person’s M-PESA account which is exactly what Equitel seeks to achieve with its new offering.
Equitel can rely again on its agency network to introduce innovative banking solutions that allow subscribers to save, receive loans as well as make transfers between banks and Saccos, thereby allowing them to lock more customers from especially among the mass market.
Other Service Offering
As expected, Equitel also offers additional services including voice, SMS and data. Equitel will charge Kshs 4 for on-net calls which is higher than other offerings. The data rates are also higher, with Equitel selling Kshs 1,000 for 1.5 GB of data, which is higher than what is offered by other mobile network operators.
So, is there a disruption coming courtesy of Equitel? Definitely. I think the real disruption exists not in disrupting Safaricom or M-Pesa or even Elma. No. It lies in extending the services to the mass market. Waging a war against Safaricom will likely be a costly affair which wont take consumers near Sybaris, where Equitel thinks it will take them.