Safaricom’s M-Pesa platform may soon be open for use by other mobile payment services providers if new regulations published by the Central Bank of Kenya are placed into effect. The new regulation could end the mobile company’s dominance of the mobile money market which has locked many subscribers to its network.
The CBK has published the National Payment System Draft Regulations that among others items recommends that E-money issuers utilise open systems capable of becoming interoperable with other payment systems in the country and internationally. The same shall apply to electronic retail transfers.
“E-money issuers are encouraged to enter into interoperable arrangements,” reads part of the regulation. This will come as a relief to the three other mobile phone companies in the country who have been pushing for this kind of arrangement. Safaricom has however opposed it in the past arguing that it will kill innovation and slow down the systems.
The operator declined to comment on the proposed regulations arguing this would be premature. “Nevertheless all stakeholders including ourselves are keen to support the CBKs initiative to strengthen the e-payments policy environment,” the firm said in a brief statement.
The public have until October 18 to make their recommendations before the regulations can be effected. Once implemented, an M-Pesa agent for instance will be able to offer Airtel Money services without being restricted. This will mean other operators will ride on the wide coverage of M-Pesa to offer their services.
A World Bank report titled ‘Information and Communications for Development 2012 questioned the hesitation by mobile operators to formally integrate their systems which it said could be creating uncompetitive tendencies.
It said in markets where a mobile money service is tied to a dominant mobile network operator (citing the case of Safaricom’s M-Pesa which then had 68% of the mobile subscribers market), such an operator is at an advantage in dictating the terms of the product.
Globally, mobile money operators are often reluctant to allow formal interoperability because after investing heavily in their product, they do not want to make it easy for customers to move their money to competitors.
“Interoperability will benefit operators by expanding the pool of customers, reducing incentives to have multiple SIM cards,” the report reads.
The new regulations also contain a clause that may affect Safaricom’s service M-Shwari
Regulatory woes for M-Pesa?
which allows customers to earn interest on their savings and borrow loans through their phones. “E-money shall not earn interest or any other financial return from the E-Money holder or customer,” says part of the new laws.
In addition, the regulations state that E-money issuers shall not engage in any lending or investment activity. “E-money issuers who have commenced e-money issuance before the effective date, shall be allowed a period of six months from the effective date to comply with these regulations,” the regulations state.
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