The competition watchdog has ordered commercial banks and mobile telephone operators to disclose to customers all fees incurred in mobile-money transactions – shining light into what remains a dark corner of the financial services market.
The directive requires all entities providing financial services through applications, Unstructured Supplementary Service Data (USSD) codes or from SIM Toolkits to improve disclosures by end of the year.
This new requirement will require mobile telecoms operators like Safaricom to disclose all M-Pesa transaction charges -- including Lipa Na M-Pesa -- to customers just before they effect the payment and issue a receipt.
“Consumers, who transact through mobile phone platforms are not informed of the charges or fees applicable for making such payments,” the Competition Authority says in a correspondence between itself and service providers.
Commercial banks will also have to highlight just how much they bill for mobile loans, mobile-to-bank transfers, account balance enquiries, airtime top-up, utility payments among many other mobile-based services.
The directive has further roped in companies like Branch International and Tala Kenya who offer loans through mobile phones.
Like banks and mobile operators, the mobile financial service providers will have to disclose their fees, issue receipts and comprehensively describe the loan repayment plan well before a customer hits ‘accept’ on their phones.
Wang’ombe Kariuki, the CAK’s director general, confirmed that the authority had communicated its position to the financial service providers on disclosure levels, adding that the action was in response to “increased consumer complaints.”
“Many Kenyans today determine the cost of mobile financial services after the fact, a scenario which contravenes the competition law which requires service providers to inform consumers of all charges and fees “by whatever name called or described,” he said.
For instance, the over 21 million subscribers of Safaricom’s M-Pesa service made 4.1 billion M-Pesa transactions last year in what was an almost doubling from the previous year’s the 2.8 billion trades.
Many users still rely on third-party applications, flyers placed agent shops, or Safaricom’s website to determine just how much money they will incur when sending or withdrawing money.
Good sources of information like the Internet are however not easily accessible to all users, especially the low-income earners. Going forward, such information will be available to all.
It could be, for instance, disseminated in the form of a pop-up message detailing just how much an M-Pesa transfer or a utility payment made through the Lipa Na M-Pesa service will cost.
“We are currently in discussions with the CAK on this issue. We believe this is a progressive direction that will empower customers,” Steve Chege, Safaricom’s corporate affairs director, said in a statement.
“Safaricom is already proactively providing some of these services. Based on the discussions with the CAK these may be expanded and a standardized format adopted.”
Branch International, Faulu Kenya and Tala Kenya are the only three institutions have implemented the changes.
Airtel Kenya, Mobikash and Jumo have also undertaken to be compliant by the same date.
Habil Olaka, the chief executive of the Kenya Bankers Association (KBA), said he was aware of the initiative by the CAK and that member banks had been contacted individually and asked to comply.
“There will be a cost to this change but we think the cost is necessary. Under consumer protection laws, customers need to know how much they are paying for services. We welcome and support the CAK’s initiative,” he said.
The country’s leading mobile operator Safaricom, Kenya Commercial Bank and Commercial Bank of Africa are among those who have not committed to implanting the changes by mid next month.
The Business Daily understands that these firms, which operate the highly successful KCB M-Pesa and M-Shwari mobile loans are among those who have requested for more time to implement the changes.
KCB M-Pesa and M-Shwari are integrated within Safaricom’s SIM Toolkit and parent owners -- KCB and CBA respectively – contend that making the far-reaching modification requires more time.
Their argument, we understand, is that it is more complex to make changes to services that are riding on the SIM card menu that it is on the USSD and application platform.
“Due to the technical challenges presented, the Authority is reviewing the challenges with the help of a consultant and it will get back to you on the same,” the CAK letter states.
In August last year, the CAK ordered Safaricom to make public its Lipa Na M-Pesa charges for businesses that levy a commission for payments made through the system.
The directive came after it emerged that some petrol stations were charging consumers half the one per cent commission they pay Safaricom for every transaction, citing low profit margins.
Safaricom was ordered to conduct consumer sensitization about the charges and disseminate Point of Sale (POS) stickers to all its merchants highlighting the 0.5 per cent or any other applicable charge.
The telecom firm complied and publicised the *234# code through which its customers can enquire about Lipa Na M-Pesa charges.