It is said that completion is good for consumers. As competition increases, the quality of goods/services offered improve while prices drop. This is all good for consumers and it seems to be the case in the Kenyan mobile money market. With a company such as equity expressing interest in this sector, we expect competition to heat up and Safaricom knows this too well.
Safaricom has announced a reduction of transaction fees levied on its most popular person to person M-Pesa transaction bands. The new tariffs will take effect as from tomorrow (Thursday 21st August, 2014) and will see the transaction costs drop by up to 67% in the low and medium tiered bands. These include transactions of amounts ranging between Kshs 10 and Ksh 1,500. Safaricom also announced that the tariffs for sending higher amounts (above Kshs. 1,501) have been rationalised to be an average of 0.8% of the transaction value. This seems to be fair for me.
Safaricom’s Chief Executive Officer, Bob Collymore has this to say, “We have spent a considerable amount of time analyzing M-PESA usage trends and we have established that over 65% of all M-PESA person to person transactions are within the KSh 10 – Ksh 1,500 band. It is our belief that by lowering the cost of these transactions we will provide an increased number of Kenyans with affordable access to basic financial services.”
Bob Collymore went ahead to say that M-Pesa contributes close to 20% of Safaricom’s overall revenues and reducing the tariffs this much shows confidence in their long term strategy. This may all be true but I do not think Safaricom reduced its M-Pesa tariffs because they have a magical long term strategy but because they know competition is about to get tough and they want to position themselves as affordable to most consumers.
When Equity gets in this market its tariffs will automatically be lower as they will not have to hire banking services from any other institution but it will rather do these internally. Safaricom on its part has to hire banking services for M-Pesa and M-Shwari from CBA and this raises the transaction fees higher.
The transaction fees for withdrawals, Lipa Na M-PESA and all other services will remain unchanged.
The tariff announcement comes as Safaricom prepares to move the M-PESA’s backbone infrastructure from Germany to Kenya, in an investment that will open up more opportunities for cashless transactions within the country.