Disrupting mobile banking in Kenya; Equity Bank joins the list



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EQUITY Bank, whose micro-loans offerings have helped increase the number of Kenyans using formal financial services, is looking to break into Kenya’s booming mobile telecoms market. The bank says it will use the Mobile Virtual Network Operator licence it was granted in April to make financial services even more accessible and affordable. Kenyans transacted more than US$20 billion through their mobile phones in 2013, and Kenya leads the world in its adoption of mobile payments. Equity is looking to tap into this booming market by employing innovative Taiwanese-made ultra-slim “subscriber identity modules”, better known as SIM cards.

The 0.1mm-thick SIM cards sit on top of a user’s existing SIM, allowing subscribers to access voice and mobile-money services from two competing operators without having to own a dual-SIM phone or have two handsets. This technology has been opposed by Safaricom, which leads the field in Kenya, not just in mobile subscribers but also in mobile money, in the form of its M-PESA service. Safaricom has said the technology puts users at risk of fraud and wants the bank to be prohibited from issuing the cards.

Safaricom has been successful in blocking the issuance for the cards for the time being. The Communications Authority of Kenya says Equity Bank must start operations using normal SIM cards until it has received expert advice on the ultra-slim technology. The regulator is awaiting the opinion of the GSMA, a global industry body for mobile-phone operators, before making a ruling on the issue. Bob Collymore, the chief executive of Safaricom, says the ultra-slim SIMs would compromise the security of M-PESA. Yet his firm may be able to do little more than delay the launch of the Equity SIM cards. Taisys, which supplies the cards, is a GSMA member, and the SIMs comply with the latest standards.

“This is a classic incumbent move, claiming security concerns to try and prevent Equity Bank offering value-added services that Safaricom offer through M-PESA,” says Lawrence Lundy, a consultant at Frost & Sullivan. “It is unlikely that Safaricom will win the appeal. My guess is that they are delaying the inevitable whilst ramping up their marketing and product response.”  Read more as adapted from the Economist

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