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Apple services banned in China: Apple Pay next?

tech

The B.B.C reported today that Apple’s iTunes and iBooks services have been suspended in China. This puts Apple’s Apple Pay in China mobile payments plans in jeopardy. Apple Pay seems to have be saved the chop but it is not clear whether it will survive future purges. The Chinese Government has taken this step after introducing stricter rules for foreign entertainment content providers on mainland China.
It is still doubtful whether Silicon Valley darling Apple’s Apple Pay will make much of a dent in mobile savvy China with AliPay and WeChat Payments having a firm hold on the Chinese payments market. And just this week UnionPay and rising mobile star Xiaomi announced a competing service joining Huawei and Samsung Pay.
The news comes within days of Apple reporting the first ever drop in iPhone sales.

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How Sidian formerly K-Rep Bank wants to find its groove with mobile tech.

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

K-Rep was the stuffy, NGO-esque bank with dull, staid brown at its offices and branches, that advertised as the bank for microfinance. Its dull staid name was derived from an acronym. Yes, an acronym. The Kenya Rural Enterprise Programme.

Initially headquartered in Kawangware the bank that set out to be the people’s bank watched as competitor Equity stole mind and market share in the “microfinance” sector in the past decade.

Now with a seemingly deep pocketed sugar daddy in the form of private equity firm Centum , the bank has since rebranded to Sidian Bank. After long having shifted its headquarters to the more upmarket Kilimani, Sidian has announced that it is looking to technology and tech partnerships to grow .

But can a bank that looked like it coulda bored you into a coma shake off its drab past and find in the parlance of the young, swag? Like the sort of swag that Chase Bank had before it went belly up last week? The sort of tech savvy that resonated so well with young equally tech savvy savers?

The bank’s CEO Titus Karanja thinks it can. He has stated that Sidian is looking to FinTech startups for that technological edge.

“We have confirmed three startups who are ready right now to go to market. We are just completing the legal process. Another eight are at various stages of testing.”He was quoted as saying by Bloomberg.

The partnerships on a revenue-sharing basis are no doubt a huge opportunity for the local FinTech startups. And more could follow.

Sidian has lofty ambitions.The bank, which is ranked as a third tier lender, has stated plans to more than triple its customer base to 12.5 million from 325,000 by 2021.

The bank announced its rebranding in the same week that Chase went under. And it would definitely not mind the sort of patronage that Chase Bank enjoyed.

But first, it would have to find its groove.

Old bankers don’t steal, they just borrow without security : Lessons from Chase Bank on how FinTech alone can’t save a bank.

mobile banking and m-payments, tech

Chase Bank (no relation to its American namesake) was placed under receivership last week. The bank often touted itself as a key leader in FinTech and banking innovation in Kenya. When it shut its doors last week 55,000 account holders – mostly tech savvy, upwardly mobile youth – were left stranded.  KES 92 Billion (USD 900 M) in deposits hang in the balance.

Chase Bank had just invested in a new Card Processing System. (I was going to include this in my March in payments roundup.) The bank had migrated from MasterCard owned Electra Card Systems’ card processing software to Belgian based OpenWay’s Way 4 citing the need to create more custom solutions. OpenWay has recently been in the news for powering a national payments service in Switzerland and cardless ATMs in Kazakhstan. As someone quipped on Twitter yesterday the bank was the closest thing to an open source or API ready bank in Kenya. Chase Bank reportedly formed the backend for several local FinTech startups.

The bank kept a vibrant social media presence.  It had a regularly updated blog, a rarity in this part of the world.  It maintained customer care accounts on messaging platforms such as WhatsApp, even rarer  in these parts.

Ironically when the bank went down the other day, the Central Bank of Kenya blamed bloggers and social media for its demise. The Kenyan reserve bank continues to claim that malicious rumours circulated on social media caused a deposit run on Chase Bank resulting in the commercial bank’s insolvency.  But recent media reports indicate otherwise. The social media reports turned out to be mostly accurate.

As it turned out, like Imperial Bank had done before it, the bank seems to have had two sets of accounts: one public, another private. Imperial Bank is another mid tier Kenyan bank that went under a couple of months ago in the wake of revelations of decade long embezzlement and fraud by its management.  Owaahh did a brilliant breakdown of the Imperial Bank saga here . The local business press has since reported that a member of Chase Bank’s board had “loaned himself” (KES 7.9 B) USD 79 M “without security”. The bank had then apparently attempted to hide this loan by failing to publish it in its financial statements and disclosures. Perhaps a better term for this would have been theft or embezzlement.

The sheer number of Kenyan banks boded well for competition and innovation. There are 44 commercial banks in Kenya which has a population of about 45 million. Nigeria –population 182 million – has 22. The recent collapse of small and mid tier banks has no doubt sent deposits flying to the larger banks, the 7 largest of whom already control 80% of deposits.

Already there is talk of merging another bank, National Bank of Kenya, with 2 other banks, and the country’s largest bank KCB is reportedly keen on acquiring Chase Bank (in receivership). With fewer players in the field, the pace of innovation in banking will likely slacken.

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New M-PESA menu now includes KCB M-PESA

mobile, mobile banking and m-payments

Safaricom C.E.O Bob Collymore this morning on Twitter revealed a new M-PESA menu that includes KCB’s KCB M-PESA mobile loans and savings service.
The new menu appears to have been rolled out to Safaricom’s STK  overnight.
The KCB-MPESA item may be accessed via a new Mikopo na Akiba (Savings and Loans) menu item that has since replaced the M-Shwari menu item.
To access KCB M-PESA Safaricom customers may choose M-PESA from the Safaricom STK then choose Mikopo na Akiba (Loans and Savings).

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This now gives a choice of two items M-Shwari and KCB M-PESA.  From here they may select KCB M-PESA.

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After this they will presented with a menu of five items enabling them to send money to their KCB M-PESA accounts, withdraw money from these accounts and requests loans at which point they will be prompted for their M-PESA.

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Allowing KCB M-PESA users to use their M-PESA pin to access KCB M-PESA services seems to have been a solution to the frequent PIN reset requests received by the KCB. Users will now no longer need a separate PIN to access their KCB M-PESA accounts. Requiring users to have separate PINs for KCB M-PESA has resulted in numerous requests to KCB social media customer care accounts for PIN resets because of forgotten PINs.

Previously KCB M-PESA was only available via the ever so memorable *844# USSD code. The service appears to still be accessible via *844# as of the time of writing this.
KCB M-PESA was launched in March last year and has reportedly become a huge success accounting for over 90%  of the Kenyan banking giant’s new loans.
Recently KCB M-PESA users were treated to a rude shock as their loan limits were virtually universally reduced, indicating either a risk mitigation measure by the bank or higher than anticipated growth in users.
I now anticipate a rush by Kenyan financial institutions to get on Safaricom’s M-PESA menu.
Increasingly , Safaricom seems to be positioning M-PESA as a platform for financial. Questions are now being raised by some on whether the future of Kenyan banks is as menu items on Safaricom’s STK.

Branch raises USD 9.6M from Andreessen Horowitz, Khosla and Formation 8 in Series A

mobile, mobile banking and m-payments, payments

Mobile-based financial services company Branch announced Thursday last week it had raised a Series A equity funding round of USD 9.6 million (KES 1B), as it positions itself for further growth and expansion into new markets. The funding will allow for the expansion of the startup’s  operations, hiring talent in Kenya as well as expansion across East Africa in 2016.
The round was led by Andreessen Horowitz (a16z) , a prestigious US-based VC firm that has previously backed top  Facebook and Airbnb. Alex Rampell, an Andreessen Horowitz partner said: “The combination of smartphones, digital money, and machine learning offers an opportunity to leapfrog old-fashioned credit infrastructure, and that’s precisely what Branch is doing”. Seed investors Khosla Impact and Formation 8 also participated in the Series A round.
Last week, the company disbursed its first loan in Tanzania, marking an important milestone towards its goal to expand to several African countries and disburse 1 million additional loans to its customers. The company’s app already has 150,000 people in Kenya are using the app. Each customer has taken an average of  3 loans, ranging from KES 250 (USD 2.50) to KES 50,000 (USD 500). Loans are typically approved within minutes.
Branch launched its mobile app in May 2015. It uses advanced data science to calculate a credit score for its customers by analysing the information on their phone such as call and SMS history.
“Our product is simple. Forget about bank queues and month-long processes. Branch is like a bank in your pocket, there for you at all times”, explained Daniel Szlapak, Africa Director. “The proprietary technology we have developed means that we are able to charge lower interest rates than our competition, and reward users who repay on time with lower fees, larger loan amounts and more flexible repayment terms as they continue to use the app.”

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Mpesa isn’t digital cash like Bitcoin.

Bitcoin, payments, tech

Dominic Frisby the brilliant author of such books as “Bitcoin: the Future of Money?” and “Life after the State” wrote a great piece on why we should fear a cashless future in the Guardian earlier this week.  The article makes a lot of observations that I agree with, and voices a lot of sentiments that I share. There are many uses for private transactions which are perfectly legal. The war on cash and the continued efforts to shepherd people wholesale to a cashless economy are part of a wider state war on anonymity waged on several fronts (See the FBI versus Apple). The campaign to ban the EUR 500 note in particular – beloved by rappers and reportedly  drug dealers – is rather misguided. Cash does indeed empower its users and enables” them to buy and sell, and store their wealth, without being dependent on anyone else”. Poor people and small businesses rely on cash  transactions. Doing away with cash will likely make them poorer, and definitely opens the way for mass state surveillance.
Except he errs in referring to M-PESA as digital cash, while M-Pesa represents the very Dystopian cashless future he is afraid of.

“Which is why there will be a role to play in the future for new forms of digital cash – from Kenya’s M-PESA to bitcoin – money you can use even if you are not financially included”

M-PESA isn’t digital cash like Bitcoin. In fact M-PESA isn’t cash period. M-PESA is a mobile remittance service that is owned and operated by Safaricom, a private business with deep ties to the Kenyan state, which owned a substantial stake in the telco up until the last decade. Safaricom all at once provides telephony and banking services to the public and surveillance equipment to the state. M-PESA transactions are by no means anonymous. Users of the remittance service must comply with KYC requirements issued by the Central Bank of Kenya. All M-PESA transactions can be traced. Those withdrawing and depositing money into M-PESA are required to show state issued identification documents. And the owners of the mobile money service , Safaricom, reserve the right to kick off any user of the service at their sole discretion. The service isn’t interoperable with any other mobile money service in Kenya where several of these mobile remittance businesses exist. M-PESA is a form of financial inclusion. It isn’t “money you can use even if you are not financially included”.
While I am sure a lot of people are at a loss to picture M-PESA (especially in the West) if they have never used it before, thinking of it as a bank account where your mobile number is the bank account number might help. The bank runs a large network of banking agents, in this case M-PESA agents. These agents are vetted and picked by the bank. Transactions are wired via the bank’s GSM network. Hopefully this will make for a much more nuanced discussion of M-PESA.

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Dear TMS Ruge, Quartz called it as it is

mobile banking and m-payments, payments

The online publication Quartz published an article yesterday about Mobile Money and specifically the Kenyan M-PESA. I agree with the sentiments in the article. M-PESA, ubiquitous here in Kenya, has never really lived up to its potential. Online payments are an obvious gap in the product’s features for instance. Small transactions aren’t feasible due to exorbitant transaction fees. And the lack of interoperability hampers innovation and competition.
TMS Ruge, a founder of the Ugandan remittance service Remit.ug has since written a response to the article in which he says

Dear Quartz, it’s too early to make a call on the success of mobile money in Africa

I disagree. M-PESA has been around for close to a decade. In that period Android smartphones have made their way into millions of hands around the world.Uber went from a quaint German word we all didn’t know exactly how to pronounce to the service Nairobi cabbies are fighting tooth and nail today.
As a student of the impact and adoption of technology, especially  payment and financial technology I feel that M-PESA has had plenty of time to make an impact.
In response to Quartz’s observation that

The impact of mobile money, for one, has not been uniform across the continent. M-Pesa has been a resounding success in Kenya, where over half of adult consumers have an account and a huge share of the country’s GDP passes through the system. Yet it was slower to take off in Tanzania, and an outright failure in South Africa.

Ruge says

I think this is Quartz’s idea of kicking a Kenyan child just because it isn’t winning marathons. This is article smells of a half-backed “yeah, but…”
M-Pesa is a huge success in Kenya, yes. That doesn’t mean it has to be a success everywhere on the continent. M-Pesa is a digital currency, as much as the Kenyan shilling in Kenya. No one said the Kenyan shilling was a failure in Uganda or Rwanda.

M-PESA has been touted as a world beating mobile money solution. When it fails to win the race in the neighbourhood playground questions must be asked.

Ruge goes on to say

Even though M-Pesa’s about 10 years old, it doesn’t mean that mobile money on the continent is anywhere near mature, and thus ripe to be graded success or not. With a billion mobile devices on the continent and a rising uptake in smart phones, we are just getting started.
In Uganda, MTN continues to see modest growth in it’s mobile money subscribers. There are now more mobile money accounts in the country than traditional bank accounts . There are a lot of eggs in Uganda’s emerging digital economies that are getting ready to hatch; this is the youngest country on the continent, internet penetration is approaching 35%, a few bricks were torn down in the interoperability wall between M-Pesa and MTN’s Mobile Money.

The facts about Internet penetration and the uptake of smartphones have little to do with Mobile Money.  Solutions like M-PESA work just fine on dumb phones without Internet connections. And of course Uganda isn’t the youngest country on the continent. That honour falls on South Sudan. But I digress.

Not sure how much longer than 10 years Ruge would have us wait before we form an opinion on M-PESA’s prospects.
Here is what M-PESA has proven so far in the last 10 years: It has failed at micro-payments, the sort of transactions people make at their mama mboga’s (green grocer), it is extremely expensive to the people that do make transactions on the service (sending a dollar attracts a 10% commission charge, withdrawing a dollar a 27% commission) and it can not stand up to competition from  banks in countries where banking is more pervasive.
In the same period, Safaricom the company that owns and operates M-PESA has fought aggressively against mobile money interoperability.

It is too early to call mobile money a failure. There are too many pieces still forming in the continent’s primordial digital soup. To claim to have enough facts to have such a view smacks of complete ignorance of the facts on the ground.

M-PESA did fail in South Africa. That’s a fact. Still the Quartz article makes no such sweeping  statement about mobile money’s failure, pointing out instead that it has failed to live up to its potential.
We have seen enough and we are tired of waiting.

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February in Payments

payments

Here is a summary of the month of February in payments:
At the Mobile World Congress, PayPal announced that they would be linking their service with M-PESA. It seems that the move would happen through PayPal subsidiary Xoom and not PayPal proper. An M-PESA-PayPal linkage allowing people to move their funds between PayPal and the mobile wallet service could potentially be huge for the payments processor. The company also sought to play catch up with mobile competition by launching a revamped mobile app.
The American online payments processor is facing increased competition at home from startups such as VenMo, Square and Stripe.

Stripe’s product is expecially interesting as it allows companies to receive card paymnets directly effectively cutting out PayPal’s role as a middleman.
Still on Stripe the startup introduced a new service as it seeks to expand worldwide. Stripe’s Atlas service will allow companies all over the world to incorporate in the US in order to receive payments. I suppose that a huge obstacle to the company as it seeks to expand internationally was the need for companies to be domiciled in juridisctions where the startup is allowed to operate, mainly the United States. For USD 500 only, now businesses from all over the world get a corporation incorporated in Delaware, a business bank account and an account with Stripe allowing them to receive payments from all major card issuers.
The Chinese New Year came with the news that Chinese consumers had made more mobile payments via WeChat payments on the lunar New Year than PayPal had had transactions in the year before. WeChat is the end-all-be-all-app in China, where mobile payments are very strong.
Still in China, Apple Pay launched the month before, but they will have to deal with a Chinese payments ecosystem that is dominated by AliPay, and formidable competitors such as the aforementioned WeChat payments.
Closer home the Central Bank of Kenya rules requiring all those transacting more than KES 1,000,000 in cash to give special reasons came into full effect. Commercial banks are expecting the uptake of alternate channels such as EFT and RTGS to increase in the wake of this move. A section of the legislature has since moved a motion that seeks to ammend the rules.
Across the border in Uganda, the Communications Commission shut down Mobile Money services as Ugandans went to the polls, in a move it said was meant to ensure security on polling day. The move goes to show the increasingly important role played by mobile payment services across East Africa. Local remittance service Remit.ug , that allows people to send money directly to mobile from their payment cards abroad, had to ask customers to come fetch money from their offices as a work around.
The government of Kenya announced that it collects over KES 2B in e-payments from its e-Citizen service. The County of Nairobi also announced that they intend to stop cash payments at City Hall completely at the start of the next financial year following the reported success of it’s e-JijiPay payment service.
Meanwhile international bitcoin fund BitFury announced an investment in local Bitcoin remittance startup BitPesa.

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As seen in the Daily Nation

as told by moshe, tech, Teke Teke

I am not even sure how I hadn’t gotten round to posting this on my blog, but the Daily Nation, Kenya’s leading daily newspaper ran a story on the weekend of the GES (US President Barack Obama visited the country to open the summit) on my startup Teke Teke. Flo, my co-founder did a stellar job on the interview and The Daily Nation called us

“an ingenious delivery service”

As seen in The Daily Nation: An Ingenious Delivery Service

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Liquid Telecom Kenya announces move into retail Fibre Market with Hai Waya brand: Firm to connect 500 homes in Mlolongo, 1000 in Runda to its FTTH network

internet, Kenya, the net

At a press conference to outline its last mile strategy for the year 2016, local fibre operator  Liquid Telecom Kenya has announced that it is moving into the retail Fibre To The Home (FTTH) market in Kenya under its Hai ISP brand.
Liquid Telecom Kenya says the service will formally launch in March 2016. In the meantime the firm plans to connect 500 homes in Mlolongo and 1,000 homes in Runda to its FTTH network. Pricing information for Liquid Telecom’s FTTH packages dubbed Hai Waya is available on hai.co.ke.

While a new entrant in the FTTH market to challenge incumbents Zuku, Safaricom and JTL’s Faiba is welcome, Liquid Telecom’s Hai will hardly be a game changer on account on its price tag.
I checked  for pricing on the website and the cheapest package available for my area was 10 mbps (both upload and download) unlimited at KES 3,499/- per month. Dubbed Hai Waya 10, the package includes a free WiFi router. A one off installation fee of between KES 4,500 and KES 15000 will be charged after site survey.

More expensive packages are bundled with ipidiFlix, seemingly the firm’s answer to NetFlix.

Pan African fibre operator Liquid Telecom, that took  over the operations of local outfit Kenya Data Networks (KDN) and created Liquid Telecom Kenya launched Hai, its new ISP brand, last August in Zambia. The firm said it planned  to offer Internet access to households and SMEs under the Hai brand, which is derived from  “I’m alive” in Swahili. Brand launches in Rwanda and Kenya were planned to follow shortly after.

Nic Rudnick, CEO of the Liquid Telecom Group, was quoted as saying at the launch, “We have firmly established  Liquid Telecom as the premier wholesale carrier in Africa. Expanding into the retail market has become a focus for Liquid Telecom and we acquired a number of retail brands as part of our geographic expansion. We will continue to invest heavily in Africa as we believe that every person has a right to be connected.”

Hai was to offer a number of ISP services including a FTTH service that provides 100Mbps download speeds with uncapped packages and a video-on-demand service that brings Hollywood movies, top-rated TV series and kid programmes. A WiFi hotspot service for public places such as markets, universities,and airports was also reported to be on the cards.

Liquid Telecom Kenya reported that it currently operates 4,200 km of fibre in Kenya, connecting 39 out of the 47 counties. The firm’s parent firm Liquid Telecom recently embarked on a 2 year 10,000 km submarine cable project, linking South Africa to the Middle East.