Reaping the benefits of a cashless society
Mobile money transactions such as M-Pesa have made the traditional economy players grow wary of immense losses in the form of eroded market power, reduced customer loyalty and erosion of direct consumer relationships.
A Safaricom agent transacts on the M-Pesa money transfer service which has become lucrative for agents and moves billions of shillings every day. FILE PHOTO | NMG
The rapid evolution of a digital economy, better known as “cashless society”, bears great promise for the future. At the same time, the rise of powerful players necessitates reviewing of laws and regulations on market dominance. The increasing power of innovation in the technology used for financial and mobile banking services further raises these alarms, justifying the review of competition laws. Mobile money transactions such as M-Pesa have made the traditional economy players grow wary of immense losses in the form of eroded market power, reduced customer loyalty and erosion of direct consumer relationships.The arrival of new non-traditional players has unequivocally raised the level of competition within the financial markets. This comes at a time when the Central Bank of Kenya (CBK) welcomed and approved the implementation of interoperability of mobile phone financial services in the country.The mobile money interoperability platform allows customers to transfer funds across networks in real time, at a lower cost and in a financially secure environment, leveling the playing field in the mobile money market, as it equally discourages market dominance by any mobile money operator.As a result, two of the country’s main telecommunications company, namely Safaricom (M-Pesa) and Airtel (Money), graced a pilot project of mobile money interoperability, with Telkom Kenya similarly introducing a new mobile money platform, T-Kash—introduced in March.This made the Central Bank of Kenya license the three Mobile Network Operators under the National Payment Systems Act, requiring them to use a payment system capable of being interoperable with other payment systems.This platform has made the three main telcos compete in a fair market by allowing mobile money interoperability across each other’s networks.Even though the market was made freer with intentions to erode market dominance by introducing mobile money interoperability, events witnessed recently are in stark contrast. Safaricom’s M-Pesa services left millions of Kenyans stranded as users were neither able to send nor receive money; stagnating millions of business transactions.
In a country where people have fully endorsed mobile money payment systems, the outage was as irritable as it was disruptive to the many businesses that rely on it.The outage simply demonstrated that other telcos need to up their game, which could be attained by first identifying themselves as the best alternative, and through increasing their visibility and accessibility. Another pivotal way would be through partnering with numerous businesses to allow for mobile payments using their platforms.It was a wake-up call to all other telcos providing mobile money services. It simply showed that they need to be more visible and accessible.Further, with the CBK allowing mobile money interoperability between network providers and approving the three main mobile operators under the National Payment Systems Act, it beats logic to complain that one company has dominated the market since the move was intended to increase financial accessibility among all the mobile money providers and reduce market dominance.Baston Woodland, Advocate of the High Court of Kenya.