After a much intensified price war between mobile telephony companies, Zain and Safaricom in 2008, the former upped the ante on February 16, 2009 when it simultaneously launched a service a money transefer service in Nairobi, Dar es Salaam and Barcelona that is likely to send the latter back into the corporate drawing board. BETHSHEBA ACHITSA reports.
The new product, Zap, comes 68 days after Zain started phasing out an earlier money transfer service, Sokotele, that it offered in conjunction with K-Rep Bank. During the launch in Nairobi, the Zain Kenya Managing Director, Rene Meza, said Zap was more than just a money transfer service as it would allow its customers to pay other utility bills, an option that Safaricom’s M-Pesa is yet to introduce. To establish the new product, Zain has partnered with regional and international banks, including the Citi and Standard Chartered groups.
Following the launch, Zain and Safaricom are yet again poised to lock horns in a pricing and value addition war on the mobile money services front. Customers of the new money transfer service will pay KSh10 (US$0.125) per transaction, just about one quarter of what M-Pesa subscribers pay.
And with a customer base of more than 100 million people in Kenya, Uganda and Tanzania, Meza is confident that the new service will effectively rival or even surpass the M-Pesa users. He says Zap has attracted more than a million subscribers in the two-month period that it had been running on a pilot basis and has more than 3,500 agents across the country (M-Pesa is said to have 5000). Pundits say Zap is likely to reshape the future of banking in Africa where 90% of the continent’s population remains unbanked.
Research shows that mobile banking and mobile payments can lower the transaction costs of money transfer, increase the flow of money by making it easier to send smaller amounts and introduce those without bank accounts to a means of secure financial management.
Although it is anticipated that Zap will tip the scales due to its enhanced functionalities, experts say current M-Pesa customers will take some convincing to migrate to the new service. Subscribers using the money transfer option will send amounts ranging between KSh50 (US$0.625) and KSh35, 000 (US$437.5) and pay a flat rate of KSh10 for every transaction. Other functions like management of bank accounts would be determined by the nature of the transaction carried out.
Safaricom, which launched the M-Pesa money transfer in March 2007, is thus likely to reduce the fee charged on transactions to keep Zain in line and thus prevent its customers from migrating. This will no doubt benefit consumers.
M-Pesa is said to have more than 5,000,000 registered users and almost 5,000 registered outlets across Kenya. It has transferred almost KSh60 billion (about US$750 million) since it started. In September 2008 it is estimated to have transferred KSh9.61 billion (about US$113,262,500) and in October it was reported to have transferred more than KSh10 billion (US$125,000,000).
This has not gone down well with commercial bankers who fear that M-Pesa, a mobile wallet of sorts ‘and now Zap’ is usurping their role according to Kenya’s Banking Act.
According to well-placed sources, four big local banks formed an “ad hoc committee” to try and get M-PESA stopped. The bankers pitched their case to the then acting finance minister in Kenya, John Michuki, on December 8, 2008, arguing that M-PESA was unregulated and therefore similar to a ‘pyramid scheme’ and that people could lose their money if it collapsed. This led to the delayed launching of Zain’s Zap by the Central Bank of Kenya. However it was found that the fears expressed by tradional bankers were not well founded and so Zap, like M-Pesa, was given a clean bill of health.
The fact that banks have about 750 outlets across the country compared to M-Pesa’s 5000 and Zap’s 3,500 explains why the industry is more worried and their tension will be high now that Zain has joined the fray.
Perhaps with many entrants into the telecommunications and financial markets governments need to put in place stricter regulatory measures to forestall cross border money laundering and to monitor money transfers.