Kenya Leading the World on Mobile Money Transfer
Kenya currently tops the world in mobile money transfers with Safaricom being the most preferred platform. In the period between January and June 2014, mobile money subscribers increased from 25.5 million to 26 million. Also, over 6,600 agents have opened shop since January 2014, raising the number of agents in the country to 120,781.
Mobile Payments allow users to pay for bills, purchase goods and services, buy insurance, get loans and easily transfer money among other services. Equity Bank, which has around 8 million customers, has stirred great attention among other players and analysts by entering into this sector. Mobile technology has revolutionised the Kenyan banking and payment system. It offers new opportunities for banks to provide added convenience to their existing customers in urban areas and reach a large population of unbanked customers in rural areas. Kenyans rely heavily on their mobile phones to access financial services due to the convenience and ease the mobile phone offers. Mobile banking offers savings services to millions of unbanked consumers. Transactions are instantaneous, secure and costs are low. 80% of the Kenyan population owns a mobile phone and 17 million Kenyans are connected to the mobile internet through a wide range of very affordable prepaid cards with both voice and data services. As a consequence, there are 21 million subscribers of mobile banking (two thirds of mobile subscribers) and among them, 5 million unbanked Kenyans. (Source: Communications Commission in Kenya).
The growth of mobile banking can be contributed to the inaccessibility of physical banks mostly in the rural areas. Kenya has 43 banks totaling approximately 2,000 branches while there are at least 120,000 mobile money agents offering more or less the same services. According to the central bank, there are at least thirty of these agents for each ATM. Mobile Network Operators (MNO) have partnered with several banks in Kenya to offer banking services to customers. The most successful been the collaboration of M-Pesa with Commercial Bank of Africa to launch M-Shwari. M-Shwari allows its customers to open a bank account through their mobile phones without visiting a bank, save money and get interest on their savings, as well as obtain micro loans. Equity Bank, one of the leading retail banks in the country, offers various mobile banking services to customers. They include: Eazzy 247, Airtel Money, M-Pesa ATM Withdrawal, YuCash and Orange Money.
Regulatory Framework for e-Money – Kenya National Payments Regulation 2014
The National Payments Regulation was launched in August 2014 by the CBK. The regulations give a formal legal framework for mobile money. Prior to this, the prudential and market conduct requirements and monitoring obligations for mobile money providers were articulated in the letters of no-objection granted by the CBK. For operators, the NPS Regulations provide much needed certainty in the market and direction for investors seeking to enter the market. The guidelines brings many benefits for customers, such as consumer redress, disclosure of terms of service, maintenance of privacy and confidentiality of customer data. The CBK has adopted a functional (rather than an institutional) approach to regulation where banks and non-banks – including Mobile Network Operators – are permitted to provide mobile money services.
The new regulatory framework includes measures to safeguard funds. These must be held in trust with a strong-rated prudentially regulated bank and no lending or investment of such funds is permitted. The funds are isolated from the service provider’s own funds and safe from claims of its creditors. The regulations also proposes that e-Money issuers use open systems that allow interoperability with other payment systems in Kenya and globally. The new regulatory framework shows promise for increased collaboration amongst providers, (e.g. in shared distribution infrastructure and interoperability) as well as fostering greater competition and innovation. Over time, the net effect of the NPS Regulations on increasing financial inclusion and expanding the digital ecosystem in Kenya will be known.