The Competition Authority of Kenya (CAK), has compelled Safaricom to lower and publicly disclose its third-party mobile banking service charges, in a move that intensifies the heat on the dominant telecoms operator.
Safaricom last month signed an agreement with the CAK to cut the Unstructured Supplementary Service Data (USSD) prices for financial transactions going through its network.
USSD allows users to get access to a range of applications and services, such as mobile banking, via short-codes like *144#. Under the agreement, Safaricom is also required to post online all the fees it charges for USSD services.
“The disclosure will be clear and simple enough to enable wholesale corporate customers and Safaricom retail end-users to understand and compare pricing of USSD channels when accessing mobile financial services,” reads the agreement signed between Safaricom and the CAK.
Safaricom was charging between KES.2 and KES.5 per three-minute USSD session. Under the new agreement, Safaricom is expected to cut its charges to KES.2 per three-minute USSD session beginning this month (March 2017). Within eight months, the price is supposed to fall farther to KES.1 per three-minute session, a price that will be retained for at least five years.
This lowering of prices comes a couple of weeks after banks launched a mobile money platform, Pesalink, that enables users to transfer money directly from their accounts to counterparts with accounts in other banks without going through Safaricom’s M-Pesa service.
The decision to lower prices comes in the wake of a market inquiry by the CAK into Kenya’s USSD market. There were concerns that USSD pricing models were barring financial service institutions from competing effectively with the company’s M-Pesa service.
Although the market inquiry commissioned by the CAK has not been made public, Business Daily indicates that details of its findings have leaked through a draft report on the competitiveness of the telecommunication sector authored by consultancy firm Analysys Mason on behalf of the Communications Authority of Kenya (CA).
According to Analysys Mason, the USSD market inquiry “indicates that Safaricom may be favouring service providers with whom it has common financial interests.” Business daily reports that Safaricom has denied charging discriminatory prices.
“Where there has been any variation in pricing, this has been due to volume discounts offered to USSD customers who generate significant traffic, which is a normal practice,” said Mr Stephen Chege, Safaricom Corporate Affairs director.
Under the agreement with CAK, Safaricom is restricted from imposing “dissimilar conditions to equivalent transactions with other parties” and is also expected to review its policies on volume discounts. The telecoms operator is also expected to comply with the competition law and all the conditions agreed with the CAK.