Interoperability paves the way for financial inclusion
The recent agreement by Kenyan Telco players to execute an interoperable wallet-to-wallet system will lead to a more desired level of competitive status. It will further facilitate an open system with unquantifiable benefits to consumers, industry players and the economy – gravitating towards financial inclusion. Fundamentally, it gestures the beginning of the end of the era of ‘walled gardens’ – where subscribers were straitjacketed on single platforms, unable to freely transfer money to users on other platforms.However, it is imperative to note that its success, in as much as all operators are demonstrating cooperation, requires regulators to ensure that initiatives such as these thrive.
Interoperability paves the way for financial inclusion
Proper rules result in long-term benefits to consumers as they are assured of freedom of choice and competitive pricing. FILE PHOTO | NMG
Kenya has been lauded as one of the most successful mobile money markets in the world. However, failure to effect comprehensive interoperability may be seen more as a competitive barrier than by default. The recent agreement by Kenyan Telco players to execute an interoperable wallet-to-wallet system will lead to a more desired level of competitive status. It will further facilitate an open system with unquantifiable benefits to consumers, industry players and the economy – gravitating towards financial inclusion.Fundamentally, it gestures the beginning of the end of the era of ‘walled gardens’ – where subscribers were straitjacketed on single platforms, unable to freely transfer money to users on other platforms.However, it is imperative to note that its success, in as much as all operators are demonstrating cooperation, requires regulators to ensure that initiatives such as these thrive. This is the only way to keep the environment conducive enough to encourage further growth and development in this market.
Over the years, regulatory nudge has pushed the industry forward. The liberalisation of the telecommunications sector in Kenya, that came after the passing of the Kenya Information and Communications Act (KICA), 1998, saw the first wave of concerted regulatory intervention. It ended the monopoly that the then Kenya Posts and Telecommunications Company (KPTC) had, leading to the entry of new players, and thereby enabling consumers to reap more benefits. This would see the entry of cellular operators in the year 2000 and 2001, as well as Internet Service Providers (ISPs) in 2005, ending Telkom’s hold on provision of Internet backbone and international gateway. This led to price reductions and introduction of other services and solutions to the sector. Broadly, these actions helped shape and sustain exponential growth of the sector, to deliver notable coverage expansion that eventually triggered growth of these ISPs and other resale services. All this was realised off the back of regulation and compliance by KPTC, the then monopoly and dominant player, thus enabling the market to thrive. A market regulator’s responsibility never stops. It is the continued review of checks and balances that keep the level of competition and market scales in check, ensuring an attractive market for further investment by current and prospective entrants.The Communications Authority currently has in place regulation that addresses quality of service that telco operators offer and punish those who fail to meet expected service level threshold. Punitive regulation has been put in place the world over to encourage further compliance. In 2015, the Federal Communications Commission (FCC) in the United States fined Telco AT&T $100 million, for misleading customers about their wireless speeds, thereby violating the “transparency rule” of its Network Neutrality requirements. It is commendable for a market player to rise to the top due to an innovative strategy. However, this success also depends on regulatory interventions that will encourage growth of the smaller players in the market by way of further investment in resources, infrastructure and research. The current trend is worrying, with smaller players becoming ever more cautious and deliberate with the investments they make, as returns are not assured, despite the creation and roll-out of trend-setting products and solutions, in line with market needs. Back to Interoperability, whilst we just got started, it is not too early to call for an expansion of the interoperability scope by the regulator – from wallet-to-wallet interoperability to other propositions like agent interoperability, wallet-to-service providers, bank-to-wallet, and wallet-to-merchant to stimulate further financial inclusion. It is worthy to note that the Kenyan telco sector is unique, and should not be compared to other conventional sectors within the larger service industry.Customers of any given telco operator in any market are not independent of other operators’ customers. It is a whole communication eco-system in which the actions of one operator directly impact not only its customers but the customers of the other operators as well. Within the telco sector, there remains the need for continued and step-by-step oversight by the regulator to ensure growth, market attractiveness and a level playing field. All these result in long-term benefits to consumers as they are assured of freedom of choice, competitive pricing and better solutions. Granted, interoperability is a multifaceted affair. Challenges will swarm free but they must be dealt with. Operators, especially those first-to-market, long used to profiteering from a skewed competitive landscape, at least from experience in forerunner interoperability markets, are wont to perceive interoperability as perilous and expensive thus placing hurdles. For instance, other than high initial set-up costs, interoperability means that industry players, will end up sharing resources, meaning a probable charge put on interoperable transactions as a cost for using the other company’s network. READ: Interoperability lifts Equitel’s growth to Sh711bn value of transactions