Equity Bank chief executive James Mwangi. Illustration/Joseph Barasa
What you need to know:
The lender plans to migrate 12 of its financial services products to the virtual network besides offering standard telecoms services such as voice, text and data.
Two months ago, Equity Bank, alongside two other firms, were awarded the Mobile Virtual Network Operator (MVNO) licences, opening for them a special entry window into the world of mobile telecommunications that is to date dominated by four players.
Equity, which is Kenya’s largest bank by customer base, has in recent weeks been preparing for the July launch of the service. The lender plans to migrate 12 of its financial services products to the virtual network besides offering standard telecoms services such as voice, text and data.
The entry of new players into the highly competitive telecoms market has caused excitement among consumers, especially the promise of lower prices.
The Business Daily’s Mugambi Mutegi talked with Equity’s chief executive James Mwangi on the finer details of what consumers should expect. Here are excerpts of the interview.
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Your partnership with Airtel Kenya means you are basically going to use someone else’s infrastructure to deliver your product. How much are you paying for that and how long will the deal last?
The contract with Airtel is open-ended and we have not paid them any money so far.
Once we go live, we will be paying them a variable cost depending on use of the network. The ratios are yet to be agreed. I can say that ours will be like paying for electricity after use.
But remember that we are not coming on board Airtel’s network empty-handed but will be adding millions of Equity customers to the unexploited network, giving them a chance to increase their customer base and make more money.
If a time comes when we will have exhausted Airtel’s 60 per cent unused capacity, we will think about investing in extra towers.
For consumers, cost is a significant factor in deciding whether to pick up a product or not. You have mentioned that customers will be charged a graduated fee to send money up to a maximum of Sh4,999. Above that, a standard charge of Sh25 will apply. Could you please elaborate on withdrawal fees?
For amounts up to Sh4,999, the charge is one per cent of the amount sent. To send Sh5,000 and above, you will be charged Sh25 regardless of the transaction amount over and above this.
But when it comes to withdrawal, the fee payable will depend on the channel the customer uses.
If they cash the money at an Equity or Airtel agent, the maximum charge will be Sh25. If they use our ATMs, they will part with Sh30.
However, if the withdrawal is from another bank or mobile operator, the customer will be subjected to the prevailing withdrawal charges for the particular bank or operator.
Assuming an Equity customer is sending money to an Airtel customer, and given your current partnership, what rates apply to both sets of clients?
We are sharing our agency, branch and ATM network with Airtel. Therefore, in terms of charges and experience, there will be no difference between Airtel Money and Equity agents.
In the example you have given, the Airtel customer will still be charged as if she was an Equity account holder. This is what we have all along been pursuing – avoiding to compete with the telecoms service provider.
Do you foresee a scenario where Equity and Airtel agents will merge in the future?
Just like Airtel offered us their excess capacity, Equity agents currently have excess capacity and they would love to offer more transactions.
Our agents are currently making between Sh50 million and Sh100 million from us in agency fees every month. With Airtel transactions that could rise to Sh150 million.
Some of your rates are way lower than the market rate. How are you keeping them this low and how sustainable is this once you start paying Airtel?
The benefit of charging customers about a sixth of the market rate is a direct consequence of sharing infrastructure and saving on costs. This is how we could keep interest rates on our loans at a maximum of two per cent compared to the prevailing rates of 7.5 per cent.
We have tried collaborations in the past but it did not work because everybody wanted everything for themselves.
I believe you are making reference to M-Kesho, a product you launched in collaboration with Safaricom, and with little success. The mobile virtual network is your second shot at this market. Why do you believe you will be successful this time round?
We now have control over the infrastructure. We have removed the middleman and, therefore, cannot blame anybody for the pricing of our products.
Secondly, we now have access to the SIM cards with unique capabilities. We will be distributing the new SIM cards through our branches and this should help us map a client’s mobile number to their account and ATM. This information will give us great insights about their spending behaviour.
People are saying that Equity is going to war with the current set of telecoms operators, more specifically Safaricom. What is your take on this?
Equity is primarily a financial services provider, not a telecoms operator. All we have done with the mobile virtual networks is to digitise 12 of our existing products and offer another channel for financial transactions.
Money transfer is just one of them. That said, I would like to clear the air that we are not at war with other telecoms operators.
In the grand scheme of things, do you foresee people leaving the networks they are on or even consumers buying new phones to insert Equity SIMs?
Clients will not need to have two phones. Anyone who wants to stick with their current mobile operator and to enjoy Equity’s banking solution will get a thin SIM card that can be placed on top of the telecoms operator’s SIM card.
This ‘SIM Skin’ turns your phone into a dual SIM although it has only one slot.
When is your voice network going live and what services should your customers expect?
When we launch in July, we shall be a complete telecoms outfit providing data, voice and text services, complete with a mobile number. The mobile financial services platform is ready and we are just waiting for the voice services to be finalised, including coming up with a brand name.
What security measures have you put in place to ensure that clients’ money and their personal information is secure on your network?
All the data in the SIM cards will be encrypted with the help of three global firms. One is from America, another from South Korea and the last is German.
Airtel is a regional company and so is Equity. Are there plans to expand this mobile virtual network across our borders to Uganda, Tanzania and Rwanda?
All we have to do is connect to Airtel in Kenya and then the operator will complete the connection with its subsidiaries in these countries.
Once we cover the eight million customers in Kenya, we will go out to the one million in the region making coverage of neighbouring countries effortless.
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