Equity restores M-Pesa services after two-day outage

Equity Bank on Wednesday restored mobile money withdrawals from its Automated Teller Machines (ATMs), after a two-day lockout that left millions of Safaricom’s M-Pesa, Orange Money and Yu subscribers in disarray.

The consumers, who have been accessing their mobile money through the lender’s ATMs, were until mid-day Wednesday unable to withdraw cash from the machines that immediately cancelled all such requests.

Safaricom confirmed that the service had been deactivated on Monday though no explanation had come from Equity Bank. The services resumed Wednesday in the afternoon but Equity maintained that no such outage had occurred.

“The service was deactivated Monday although we have had no official communication from Equity,” Bob Collymore, Safaricom chief executive said.

Equity has more than 620 ATMs and 7,700 agents in East Africa that Kenyan’s four mobile operators, Safaricom, Airtel, yuMobile and Orange have been riding on to fill in any gaps in their agency networks and to boost cash flow in the system.

Through the ATMs, Equity subscribers can also withdraw money from their bank accounts and transfer it to a mobile account.

Other than withdrawing money, the cash machines also enable Equity Bank account holders to buy airtime from Safaricom, Orange, Airtel or yuMobile.

Safaricom runs an 85,000 M-Pesa agency network that is supported by multiple agreements with commercial banks, including Equity, to service its 18.1 million mobile money users.

The large agency network that makes it easy for subscribers to deposit and withdraw cash is seen to be a key ingredient of the success that Safaricom has had in positioning M-Pesa at the centre of Kenya’s payment system.

Safaricom’s rivals Airtel, Orange and yuMobile have a relatively smaller number of agents, a challenge that has forced them to rely heavily on agreements with commercial banks such as Equity.

The skewed market landscape saw Airtel petition the Competition Authority of Kenya (CAK) seeking orders compelling Safaricom to open up its agency network.

READ: Safaricom opens up M-Pesa agents' network to rival mobile

There is concern among consumers that Equity’s two-day lockout, if extended, could reverse any efforts made by the small telecoms operators to challenge Safaricom’s dominance of the mobile money market and make them the first casualty of the looming battle for control of the lucrative segment of the telecoms business.

Last July, Airtel entered into a partnership with Equity that enables its subscribers deposit and withdraw money from the lender’s agents in a move that was seen as aimed at reducing the dominance of Safaricom’s M-Pesa. 

Airtel has 12,000 mobile money agents – a reality that has placed it at a disadvantage in the quest to narrow the market share gap with Safaricom’s M-Pesa.

Equity’s entry into the mobile money business is expected to send all mobile operators back to the drawing board given its large network of agency banking and a massive customer base.

Equity plans to charge a one per cent fee for mobile money transactions of up to Sh4,999 while sending Sh5,000 or more will cost customers Sh25 regardless of the transaction amount.

Withdrawal charges are pegged on the channel the customer uses. Withdrawals from Equity or Airtel agents will attract a maximum fee of Sh25 while Equity Bank’s ATMs will discharge the cash at a fee of Sh30.

Equity has set its mobile money charges at about a sixth of the market rate, attributing it to the sharing of infrastructure that has enabled it to save on costs.

READ: Taiwan firm ships in Equity's thin SIM cards

Equity is preparing to enter the mobile money market using the Mobile Virtual Network Operator licence that the telecoms sector regular, the Communications Authority of Kenya (CA), awarded it last month.

The service will ride on Airtel’s telecommunication infrastructure at a fee, meaning it won’t incur us much capital expenditure as other mobile operators did to enter the market.

The lower charges, vast ATM and agency network coupled with a strong brand recognition built over the years has turned Equity into a powerful player with the muscle to challenge the traditional providers of mobile money services.

The bank is planning to ring-fence its more eight million banking customers from the mobile money market rivals, a feat that could position it as the top mobile money service provider based on the market share.

Safaricom has 21.1 million subscribers, followed by Airtel with 5.1 million subscribers that it expects to boost by taking on board yuMobile’s 2.5 million subscribers. Telkom’s Kenya Orange has 2.2 million subscribers.

Equity, which plans to launch its mobile money service under the Equitel brand, has shipped in millions of thin SIM cards in readiness for the rollout.

The bank has announced plans to use the ultra-thin SIM cards that are embedded with a chip and are layered over the active side of regular SIM cards.

Equity plans to use the cards to roll out telecommunications and mobile banking services, a move that has sparked off controversy pitting Equity’s mobile banking subsidiary Finserve against Members of Parliament, Safaricom and industry regulator, CA.

Safaricom, has opposed the use of the thin-SIM technology claiming it would compromise the security of other mobile subscribers.

However, after talks with Equity and mobile operators, the CA gave the lender the go-ahead to roll out the overlay cards on a trial basis lasting one year.

During the trial period, an independent consultant is expected to conduct a technical audit to determine if the technology poses any security risks to users’ data and mobile banking transactions.