Safaricom Publishes New Mpesa Tariffs: Was that a decrease? Or an increase?

tech

Yesterday, Safaricom announced that it will be decreasing it’s Mpesa tariffs. Good, we all thought. Equity’s pending entry into the mobile payments market is finally going to make things competitive. The new rates published by Safaricom today though give a somewhat conflicting picture.
There are reductions in the lower bands, coupled with increases in higher bands. The transfer fee for the voluminous KES 501 to KES 1000 band has been slashed by 44% to KES 15 from KES 27. The popular KES 1001 to KES 1500 band has also had its transfer fee reduced by 24.2% from KES 33 to KES 25. The largest tariff cut is in the minimal KES 10 to KES 49 band. Sending money in this band will now cost KES 1 down from KES 3, a 66.6% reduction.
Those sending money in higher bands though, will have to part with more starting tomorrow. Transfer fees for the KES 1501 to KES 2500 band for instance have been hiked by 21.2% from KES 33 to KES 40. Those sending amounts between KES 2501 to KES 3500  though will have to part with KES 55, up from KES 33, a 66.6% increase. The largest price hike has been reserved for the KES 3501 to KES 5000 band. Sending money in this band will now cost you KES 60, up from KES 33, an 81% increase.

Safaricom had earlier indicated that it would not be reacting to Equity’s entry into the mobile money transfer market with price cuts. The firm’s CEO Bob Collymore rather smugly pointed out that transfer fee price cuts by Airtel on it’s Airtel Money service had had little effect on its mammoth market share. Safaricom, however, seems to have since recognized Equity Bank for the formidable competitor bank is. The Communication Authority’s recent directive that Safaricom open up its agent network must have weighed on its pricing decision too.
The new rates go into effect tomorrow Thursday, 21st August 2014. Withdrawal commissions remained unchanged.

Transaction Range Minimum Transcation Range Maximum New Rate: Transfer to Other M-Pesa Users Old Rate: Transfer to Other M-Pesa Users Transfer to Unregistered Users Withdrawal from MPesa Agent
10 49 3 1 N/A N/A
50 100 5 3 N/A 10
101 500 27 11 66 27
501 1000 15 33 66 27
1001 1500 25 33 66 27
1501 2500 40 33 66 27
2501 3500 55 33 88 49
3501 5000 60 33 105 66
5001 7500 75 55 143 82
7501 10000 85 55 171 110
10001 15000 95 55 220 159
15001 20000 100 55 237 176
20001 25000 110 82 275 187
25001 30000 110 82 275 187
30001 35000 110 82 275 187
35001 40000 110 82 N/A 275
40001 45000 110 82 N/A 275
45001 50000 110 110 N/A 275
50001 70000 110 110 N/A 330

What Airtel’s win in petition to have Safaricom open up it’s Mpesa network means

Kenya, mobile banking and m-payments, money, payments, tech

Last month, Airtel Kenya won a petition against rival telco Safaricom. Airtel
had charged that Safaricom were enjoying undue advantage by enforcing an
exclusivity clause in its contracts with its MPesa agent network that barred MPesa agents from engaging in business with competing mobile network operators. Earlier in the month, the Communications Authority of Kenya wrote
both firms, directing Safariom to “immediately expunge” all restrictive clauses in the agreements between the mobile operator and it’s mobile money transfer agents.
The government agency set a deadline of 18th July “in any event” for Safaricom to effect the changes.
The Authority however stopped short of ruling on interoperability between Mpesa and rival mobile money transfer services, along with the cost of transactions with Authority Director-General Wangombe Kairuki being quoted as saying it was an issue that required input from both the Communications Authority and the Central Bank of Kenya
Could this landmark ruling by the Communications Authority be a harbinger for
the decline of Safaricom’s MPesa, and eventually the mobile telecommunications firm’s own decline?
As it is rival networks have suffered greatly from a lack of agents, with Safaricom’s near monopolization of mobile money agents. Could the opening of Safaricom’s pervasive nationwide agent network provide the much needed jolt that rival mobile money networks so badly need?
In all fairness though, rival services have also been held back by factors other than the lack of agent networks. There is little product differentiation between the various mobile money transfer offerings for instance. The lack of
an API for online merchants is a glaring inadequacy of current mobile payment services. Online commerce in Kenya still suffers from a lack of payment options. Those that do exist have no serviceable API through which integration
with merchant site software could be performed. Orange’s Orange Money, Yu Mobile’s Yu Cash, Airtel Money, Tangaza, MobiKash and the smattering of mobile money transfer services in existence today have all joined Safaricom in being
oblivious of an opportunity that is a potential game changer.
With the exception Airtel’s Airtel Money, rival offerings are not very compelling on the pricing count. Airtel made the bold move of eliminating transfer fees for its Airtel Money mobile money transfer service, mounting a
pricing challenge against MPesa. Orange Money’s pricing is at par with MPesa,
as is Yu Cash’s, presenting prospective customers little incentive to move away from MPesa.
It would seem competitors were not entirely sold on the necessity of a service such as MPesa at the onset.  That coupled with initial regulatory ambivalence made them hesitate, with firms choosing instead to compete in the voice and data segments. Little or no effort went into developing and promoting their mobile money transfer services. Consequently as MPesa took off, contending services either arrived late in the day or suffered from half hearted marketing efforts. Their mobile money offerings have since been marketed almost as an afterthought.
And what would have been an obvious move to tackle Safaricom, launching a joint service with attendant synergistic benefits was apparently never an option for competitors.
Ultimately the real beneficiary of the Authority’s decision might be Equity Bank. The ruling paves way for Equity’s much heralded mobile money transfer service, itself the subject of recent legal actions by Safaricom. The restrictions no doubt made it difficult for Equity to recruit agents. As it is most Equity banking agents also double up as MPesa agents. Equity’s entry into the mobile money arena would put this arrangement in jeopardy. The agents would have to choose between the banking giant’s nascent offering and Safaricom’s established MPesa service. No prizes for guessing which one they would likely choose.

Bitcoin: A primer Part I

Bitcoin, money, payments, tech

Countless Bitcoin primers exist on the Internet today. What, with the increased interest in Bitcoin and other cryptocurrencies. Flawed as they may be in the present, it is becoming apparent with each passing day that cryptocurrencies such as Bitcoin are going to be an important part of our digital future. A lot of these Bitcoin primers read like doctoral theses, replete with technical minutiae. Those that seek to simplify matters , simply do not have enough meat on their bones and are often fraught with plain misinformation. In this article,and others in my Bitcoin primer series, I will attempt to explain technical concepts in simple terms and at the same time convey as much of the essence of Bitcoin as possible.

It would serve anyone reading this piece well to understand four basic facts clearly. First off, Bitcoins do not exist. You cannot point to a file or an object and call it a Bitcoin. What exist are records of transactions of Bitcoin in  a sort of master ledger called the block chain. Secondly and more importantly, Bitcoin is cash. Bitcoin is not a form of electronic banking. Making payments with Bitcoins is a lot more like paying with cash than paying with your credit card or debit card. Thirdly, much like you do not require a graduate education in monetary studies to spend fiat currencies, you do not require an advanced understanding of cryptography or indeed technology in general to spend or accept Bitcoin. Fourth, there is no central bank that issues Bitcoin.The purpose of Bitcoin is to eliminate the need for such trusted third parties as central banks. Wiith these popular misconceptions about Bitcoin out of the way, the rest of this primer will read a lot easier.

So, what pray tell is Bitcoin?  A bit of history is in order here. In 2008, Satoshi Nakamoto authored  a paper that proposed the creation of a peer to peer electronic cash system.. The system would allow  online payments to be sent directly from one party to another party, eliminating the need for trusted third parties such as financial institutions by creating trust by cryptographic means. Questions still abound as to the true identity of Satoshi Nakamoto, or whether Satoshi is indeed one person or various people.  Satoshi has remained anonymous despite numerous attempts over the years to uncover her real identity. Satoshi is credited with the invention of Bitcoin and the burgeoning number of other cryptocurrencies in existence today.

As any banker or financier will tell you, all money is virtual. Money largely does not exist in the physical sense. Millions are transacted through banks daily simply by changing figures in the bank’s ledger, debiting and crediting accounts. What exist are physical tokens such as paper notes and metal coins. These paper notes and coins are referred to as currency or cash. They serve the important purpose of keeping money current, allowing people to reassign ownership of money. In fact the  Miiddle English root of the word current “curraunt” means simply “in circulation”.

Bitcoin is a cash system created in 2009 that utilizes digital tokens called unspent transaction outputs (UTXOs) in lieu of physical tokens such as paper notes and metal coins. Think of these unspent transactional units as digital coins. When you pay with Bitcoin, you reassign ownership of one or more of your digital coins to the recipient. When you accept a Bitcoin  payment you receive one or more of these digital coins.

Unspent transactional outputs or  digital coins are held in a Bitcoin address. If you were to think of your unspent transaction outputs as cash notes and coins, think of your Bitcoin address as an envelope where you stash your notes.  On terra firma , a single envelope may hold one or more currency notes and coins. Likewise, a single address can hold multiple coins at the same time. And just like having multiple envelopes to stash your cash in is possible, albeit unwieldy at times, you may generate multiple Bitcoin addresses to hold multiple coins in at the same time. When making a payment,you may draw notes from different envelopes. Much in the same way a Bitcoin transaction may draw  coins from different addresses.

One Bitcoin is currently divided into 100 million smaller units called Satoshis. One satoshi is defined by eight decimal places. That is 0.00000001 BTC. The point here is, Bitcoin is infinitesimally divisible.  Ensuring that a single Bitcoin can be divided into much smaller units is important in two ways. First, it makes it easier to price goods and services in Bitcoin and enables people to transact with Bitcoin when paying for every day goods. As at the time of writing this, Bitcoin  was exchanging for USD 570.65 on Bitcoin exchanges. Being able to divide a Bitcoin means you would be able to pay BTC 0.001 for bread in Kenya. More importantly, by design only a finite number of Bitcoin will ever exist. This number , 20,999,839.77085749 , is baked into the protocol. It is not hard to imagine a future where Bitcoins would be spread so thinly as to make 0.00000001 BTC valuable. Should further subdivisions be needed in the future, the protocol may be updated to allow for this.

I have mentioned Bitcoin addresses, the virtual “envelopes” you stash your digital coins in. But where do these addresses come from? In explaining this in a later post, the cryptographic underpinnings of Bitcoin will become apparent, but how would one acquire Bitcoins in the first place?

One may mine coins, either alone or in league with others. New Bitcoins are generated by the Bitcoin network through a process called mining. One of the specific limitations of virtual currencies that Bitcoin sought to address is that the person accepting an unspent output or a “coin” can not verify that the owner did not spend the coin twice. This is called double spending . Without the existence of a trusted third party, cases of double spending would be rampant. Bitcoin overcomes this problem by recording every transaction in a global public ledger, the “block chain”. By necessity and design, every Bitcoin transaction is appended to,  and  remains permanently viewable in, a global public ledger of past transactions called the “block chain”. In case of any doubt, or attempts at double spending, the first transaction recorded stands. Mining is simply the process of adding transaction records to this ledger or “block chain”. Those processing these transactions each receive a subisidy that is proportional to their share of the Bitcoin network’s total computing power.

The process of mining is intentionally designed to be resource intensive to ensure the steady flow of blocks of Bitcoins. The value of a block for the first 210,000 blocks or the first four years was 50BTC.  As the amount of processing power present in the network changes, the difficulty of creating new blocks and consequently Bitcoins changes. The difficulty is calculated every 2016 blocks and is based on the time taken to generate the previous 2016 blocks. Anyone can be a miner. That is anyone, with sufficient computing power and wherewithal.  Mining was the primary way to acquire Bitcoin in the early days. At the moment though, this process is so difficult as to warrant looking at other ways of obtaining coins.

Accepting Bitcoin as payment for goods sold or services rendered would be an obvious way to acquire Bitcoins. Alternatively, you may purchasing Bitcoin on the hundreds of Bitcoin  Exchanges that have sprouted online all over the world. These exchanges allow one to exchange Bitcoin for other currencies. South African Bitcoin exchange BitX are currently setting up shop in Kenya. The BitX Kenya exchange will allow you to deposit and withdraw funds via Mpesa. As mentioned earlier, at the time of writing this 1 BTC was exchanging for USD  570 or approximately KES 51,300.

In the next part I will delve into Bitcoin’s cryptographic roots; examining private keys, and  cover the secure messaging system at the core of the Bitcoin payment system.

It’s Day One of Cash Light Public Transport payments in Nairobi, Don’t Panic, here is where to get a BebaPay card

Kenya, mobile, mobile banking and m-payments, money, payments

Officially at least, cash light public transport payments in Nairobi kick off today. In reality though , very few commuters have acquired cards, and many are clueless as how the new regulations work. Either way, looks like most people got to work this morning without the need for cards.
Here are few places where you could acquire a BebaPay card.
1. Kencom
Google-Equity BebaPay promotion agents have been stalking the stage for over a year now and it’s where I acquired my first card.
You need only top up your Beba account and the card will be issued to you free of charge.
2. On board matatus
I acquired my second BebaPay card on board a Ruiru bound bus a couple of weeks ago. Uniformed BebaPay promotion girls are a common sight on a lot of matatus on some routes, you need only top up the card. I offered to top up mine with 100 bob for instance.
The BebaPay agents are helpful and will even help you open a Google (read GMail) account if you don’t have an existing one. I had them help me open a new account as I already had a card linked to my existing Google account.
3. Equity Bank Agents
Equity’s agency network is pretty widespread and is probably your best bet. In addition, this is likely where you would be topping up your card.

It’s all systems go for cash light public transport payments tomorrow, Gov’t insists

Kenya, mobile banking and m-payments, money, payments

Transport Principal Secretary Nduva Muli is confident that cash light public transport payments will go into effect in Nairobi tomorrow without a hitch amid widespread public uncertainty and confusion.
Questions still linger over interoperability between different cards vendors, with commuters fearing that they will end up having to acquire and carry multiple cards. Recently, commuters holding BebaPay cards were surprised to discover that their cards were no good on MOA Compliant and Umoinner matatus. This was after the Matatu Owners Association dropped Google’s BebaPay in favour of it’s own Jinice 1963 application.
The National Transport and Safety Authority promised to issue regulations for integration and interoperability to relieve commuters of the need to acquire cards from multiple vendors. Transport Cabinet Secretary Michael Kamau recently published new regulations requiring cash light public transport card vendors to seek clearance from the Central Bank of Kenya. In the Kenya Gazette notice dated 11th June, the Cabinet Secretary also substituted the use of the term “cashless public transport payments” with “cash light public transport”, apparently to avoid public confusion.

BitPesa hosting World Cup Watching Party, beta launch of service

Bitcoin, Kenya, money, payments

Local Bitcoin remittances startup BitPesa will be hosting a World Cup Watching Party at Brew Bistro on Ngong Road this evening. The event will also see the beta launch of BitPesa’s service. BitPesa will provide bitings and bitcoins to the first 50 people to show up.

With the launch of its MVNO, mobile money service, Equity is responding to an existential threat

Kenya, mobile, mobile banking and m-payments, money, payments, tech

Equity Bank’s most recent foray into mobile banking, the launch of its own mobile network might be interpreted as yet another example of the bank’s impressive innovation record or C.E.O extraordinaire James Mwangi’s knack for good business. Some might wonder why a bank like Equity would want to go into the already overcrowded mobile money transfer market. A market that is dominated by de facto industry standard MPesa. In reality though the bank is responding to an existential threat.

Safaricom and CBA’s mobile banking product MShwari poses the biggest threat yet to Equity in it’s traditional target market, low income earners. MShwari is targeting the same customers that were Equity’s traditional customer base. The product is targeting the same deposits Equity relies upon thus affecting the banks ability to grow it’s liabilities. Liabilities, your deposits in the bank, are a good thing in this context.

More importantly though MShwari is affecting the bank’s ability to grow it’s asset book in the form of loans. Lending money is how Equity and other banks make their money. For quite a while now, Equity Bank has been the premier lender especially among low income earners. With the advent of MShwari more and more of Equity’s low income customers are looking to the mobile banking solution for loans.

After the failure of Safaricom and Equity’s MKesho – a product launched to much fanfare and promise- due to an apparent bust up between the two companies, Big Green decided to look beyond Equity. And they didn’t have to look far. Commercial Bank of Africa, CBA, had been Safaricom’s banker for quite a while. Money in your Mpesa account was already largely money in Safaricom’s bank account at CBA. All that was needed now was a way to funnel that money from Safaricom’s CBA bank account into your bank account. Between Safaricom’s 18 million plus Mpesa account holders and KES 220 or so billion in deposits, and CBA’s commercial banking license the two realised there was a great opportunity for a most profitable partnership. Enter MShwari.

The numbers have been impressive so far. On launch day, 75,000 new MShwari accounts were opened. By February this year Mshwari had over KES 24 billion(USD 266 million) in deposits. Total loans stood at KES 7.8 billion (USD 86.6 million). Daily deposits averaged KES 211.5 million (USD 2.35 million) with an average of 30,000 loans disbursed daily.

Mshwari enabled CBA to acquire over one million new accounts, becoming only the 6th Kenyan bank with over a million account holders. MShwari has also made micro-lending possible. The average loan amount on MShwari is around KES 1000 (USD 11) a loan that would be far too expensive for traditional banks to administer.

Earlier this week Safaricom and CBA announced “Lock” a fixed deposit account product that offers MShwari account holders the ability to save as little as KES 500 at a 6% interest per annum.

The mama mboga in Githurai who had to wait till she had a spare 50 bob to deposit it into her bank account at the local Equity bank branch – to become bankable so to speak – now need only spare 3 bob to transfer to her MShwari account.

The mama mboga also had to wait months, probably join a chamaa (a women’s group) that would co-guarantee her and amass substantial savings before she could take a KES 50.000 loan. Now with MShwari she can take a loan conveniently though interest rates , at 97% per annum are somewhat forbidding. In addition she can take a KES 250 loan “ndio aslilale njaa”,(so as not to sleep hungry), an amount she can not borrow from her bank.

For most salaried people today the first transaction you make when your salary hits the bank is a withdrawal so you can deposit money into MPesa for further transfer. Remember all those 10 bobs that are always left over in your MPesa account after you send mom money. MShwari has done a rather good job of mopping them all up lately, no?
Once your employer starts remitting your salary into your Mshwari account, how long do you think before you don’t need a bank account?

And therein lie Equity’s problems. Equity’s business model has long relied on it’s ability to raise cheap deposits en masse, and lend out these deposits en masse. Low income earners do not typically have much in savings. For a long time this made them unattractive to Kenyan banking boutiques. Until Equity came along. Equity’s genius was in converting these small amounts into highly profitable small loans. Noticed how you never actually have a zero balance in your bank account. In the hands of a bank like Equity, these relatively small amounts are worth a lot thanks to credit creation.

For the bank to survive this latest onslaught they need an MPesa equivalent. It would ensure Equity’s continued ability to raise cheap deposits, open an avenue for lending smaller amounts to a much wider market, and open a potentially lucrative new revenue stream.

Welcome to the future, a bold new mobile place where banks and telcos swap places, and the lines are blurred.

Chase Bank & Rafiki DTM ATMs, mobile banking services going down for maintenance this weekend

mobile banking and m-payments, payments, tech

This just in from Chase Bank via SMS:
Dear Customer, We will have a system maintenance from saturday 14th Midnight To Sunday 15th  at 7 am. Use of Debit Cards and mobile banking will be affected.

Subsidiary Rafiki Microfinance Bank will also be going down for maintenance:
Dear Customer, We will have a system maintenance from saturday 14th Midnight To Sunday 15th  at 7 am. Use of Debit Cards and mobile banking will be affected.

You had better clear your bar tab before 12 a.m tonight if you’re expecting to use your card tonight, or make that ungodly hour ATM withdrawal.

May in Payments: You can now pay for your power in Bitcoin in South Africa, Africa’s first Bitcoin ATM and Equity Bank finally receives a MVNO license

mobile banking and m-payments, money, payments, tech

The month of May was full of big news on the payments front all over Africa. Here’s my monthly roundup of happenings on the payment scene:
You can now pay for your power in Bitcoin in South Africa. According to local tech news site TechCentral.za, South African firm Invirohub, a smart meter developer, has developed prepaid meters that allow you to purchase electricity using Bitcoin. The metres may be topped up by sending Bitcoins to a unique address associated with each metre.
Still in South Africa, the first Bitcoin ATM in Africa was installed in the city of Johannesburg this month. This perhaps points to the potential for the widespread use and adoption of the cryptocurrency in Africa.
In a related development, Kenyan startup BitPesa launched a pilot of its service which allows diaspora Kenyans to send money back home via Bitcoin at affordable rates. The Wall Street Journal reported that the start-up is running a pilot involving around 15 UK based Kenyans, who would be able to use BitPesa to remit money to Kenya.
Diaspora remittances are a lucrative market with Kenyans abroad sending home USD 1.29 Billion last year alone.

Equity Bank announced that they had finally received a MVNO license through their subsidiary FinServ, for their planned mobile money transfer service. The bank has entered into an agreement with Airtel Kenya that allows them use of upto 60% of Airtel’s excess capacity. The bank plans to start rolling out it’s network in July which will include giving out 8.7 million free SIM cards.

Equity announces MVNO roll out plans, bank to issue 8.7 million free SIM cards

tech

Local daily, The Nation, reports on it’s news website today that Equity Bank will be launching it’s MVNO network in July of this year.
The bank will also be giving out 8.7 million free SIM cards. The report on the website also quotes the bank’s C.E.O Dr. James Mwangi setting pricing for Equity’s mobile money transfer service starting at 1% of the transation fee subject to a maximum cap of KES 25.
“If you send Sh100 , you will pay Sh1. If you send Sh1,000, you will pay a maximum of Sh25,” Dr. Mwangi is quoted as saying at an event to announce the bank’s MVNO strategy held Monday.
These prices obviously compare favorably with Safaricom’s popular Mpesa service. It will be interesting to see pricing wars in the mobile money market, as well as, with new competition, improved service.
Equity is set to launch it’s telecommunications services through it’s subsidiary FinServe Africa in the second half of the year. The bank will not be rolling out it’s own infrastructure, and plans to ride on Airtel Kenya’s existing infrastructure for it’s MVNO. An agreement is reportedly already in place allowing Equity to use 60% of Airtel Kenya’s existing excess capacity.

As at the time of writing this post, #EquityMVNO was interestingly trending on Kenyan Twitter