Equity now takes on Safaricom’s M-Pesa with mobile money

Equity Bank on Monday gave consumers a peep into its mobile banking platform it says will disburse loans and offer cash transfer services for the lender’s eight million customers, posing the biggest competitive threat yet to Safaricom’s popular M-Pesa service.

Customers will pay a maximum charge of Sh25 to send any amount of money within the network, compared to the Sh125 fee the telecoms operators charge users to transfer the maximum Sh70,000 within their network.  

Equity’s mobile money service, to be launched in July under the Mobile Virtual Network Operators (MVNO) licence that the bank was awarded early this year, will also be integrated to other banks, offering customers the flexibility of making payments and cash transfers from their handsets.

“We are specifically targeting the retail payment system that is still 96 per cent cash. The pie is big and we are looking beyond the Kenyan borders. Our partnership with Airtel will enable us to roll out similar products in Uganda and Rwanda where we both have operations,” said the Equity Bank chief executive James Mwangi during a briefing on the service.

Equity is issuing all its customers free SIM cards to register for the service through which the bank also plans to disburse short-term loans to its customers an interest rate of between one per cent and two per cent per month, compared to an average market rate of five per cent.

Card-based lenders charge customers about five per cent per month, while Safaricom’s M-Shwari charges 7.5 per cent per month.

READ: Equity seeks to halve transaction costs with mobile licence

The mobile banking service will run on the NFC network technology, which will enable customers to pay for goods and services by simply tapping their handsets at Point of Sales (POS) terminals.

This is Equity’s latest stab at mobile banking after a previous partnership with the telecommunication firms through its M-Kesho product hit the rock.

Mr Mwangi blamed M-Kesho’s failure on Equity’s lack of control of the SIM card, which as a result made it difficult for the bank to control the amount they charge their customers and quality of service.

“Our previous attempts to introduce mobile banking through partners have failed mainly because of high cost of transaction. When you have telcos as middle men between you and the customers this pushes the costs up and that is why M-kesho failed,” said Mr Mwangi.

“With our own SIM cards we will remove the middlemen role to reduce the costs, increase the earnings and pass the benefits to the customer.”

Equity sees a future where its main interface with the customers will be through mobile banking, effectively building convergence of financial products and services on the mobile phone.

Equity said the lowest one can borrow is Sh500, while the maximum amount one can borrow is pegged on their credit score and history.

On Safaricom’s  M-Shwari, a joint product with Commercial Bank of Africa, customers can deposit as low as Sh1 and borrow up to Sh100,000 payable with a month.

M-Shwari’s uptake has been on the rise since its launch in November 2012.  Its customers have increased to 6.8 million in the year ended March 31, 2014, from 2.3 million the previous year.

The net deposits hit Sh4 billion from Sh0.9 billion a year ago, showing the huge potential offered by mobile banking.

Equity’s race for a piece of the lucrative retail payments market sets it up for competition with Safaricom’s M-Pesa pay-bill service offered under the Lipa Na M-Pesa option.

Safaricom does not charge its customers for using the Lipa Na M-Pesa but levies the traders one per cent of the value transacted through the system.
Safaricom currently has 122,000 Lipa Na M-Pesa merchants recruited and 24,137 actively using the service.

Equity says it is banking on its more than 11,000  mobile banking agency networks across the country and 160 branches to speed the uptake of this product.
It has also put up a 300-seat contact centre to serve its customers.

With Lipa Na M-Pesa , shopkeepers, kiosks, saloons and motor garage owners must register their businesses with Safaricom and get a special till number to offer the service that is seen as the mobile telecom firm’s reply to plastic money and other forms of cashless transactions.

Shoppers can, for instance, use the mobile money platform to pay for goods at the supermarket till and send the exact value of the good sold or service rendered thus eliminating the additional charges that have sustained cash as the most popular means of payment in the country.

The Equity mobile payments service will be the latest product that seems to be directly attacking the credit cards market where commissions stand at between three and five per cent.

Although it may not be the cheapest mode of cashless payment since Safaricom does not charge its subscribers using the Lipa Na M-Pesa, the Equity service could be a game changer within the mobile money transfer services.  

“The Sh25 cap we have put for our transactions applies to any value and conforms to our banking rates. This cannot change. However, for other networks the market prices and tariffs will prevail,” Mr Mwangi added.

The network will also allow for seamless money transfer to all banks in Kenya including being Visa and Mastercard enabled, which will enable customers to remit money directly from their banks accounts to foreign accounts.

Equity said it will also be targeting non-customers with the product.

The launch of Equity product targeting cashless payment in July is strategic given that it coincides with the government deadline on cashless public transport payment.

Equity and Google in April last year launched BebaPay, an NFC-enabled pre-paid plastic card used to settle matatu fare.