World watches Kenya’s mobile banking model

A year ago, the banking industry was just starting to grumble about M-Pesa, the mobile money transfer service from Safaricom.

The local financial institutions were arguing that M-Pesa was unregulated, unreliable and untenable in a country such as ours.

Hints of a cross-industry coup against the product came to fruition at the end of the year when the financial regulator, the Central Bank, was forced to take a stand and defend the growth of the service.

A few months later, Zap, a mobile commerce product, was launched by Safaricom’s competitor Zain, becoming the first mobile money solution to link the formerly m-banking-shy banking community with a mobile solution.

To us in Kenya, the events may have been side issues as we went about our daily business using our phones to send and receive money.

To market watchers abroad, it was hoped that our “light touch” regulators had, perhaps unwittingly, set the tone for a global response to products that will undoubtedly change the way money works for the world.

But, no.

News reports from that country indicate that Nigerian banks have been successful where their Kenyan counterparts were not, successfully blocking the launch of two mobile money solutions by MTN Nigeria and Zain in a move analysts say is sure to set the continent back several years.

Efforts by MTN Nigeria and Zain to secure the banking licence from the Central Bank of Nigeria have so far been rejected.

A report in Financial Technology, a Nigerian publication, says sources within the regulator say that commercial banks are behind the stalled process, with most working under the belief that Nigerian banks are not willing to let innovation prosper.

Ambushed
The banks cite the case of Kenya as reason why the service shouldn’t be allowed, with the source saying they did not want to be “ambushed” like the Kenyan banks were once M-Pesa was launched.

While it’s interesting that the Nigerians are calling what happened here an “ambush”, it’s more informative that once ambushed, our regulator did not balk at the thought of millions of people sending money through their mobile phones.

Rather, both CBK and the telecoms regulator, the Communications Commission of Kenya (CCK), have adopted a more sober role in the process, preferring to monitor the products rather than let the status quo continue.

The results are obvious — with over seven million people now empowered to conduct financial transactions using their mobile phones Kenya appears to be the unique case where regulation follows innovation without harm to consumers.

An important point to remember as the industry moves towards a more concrete approach to regulation.