Nairobi — Four years ago, Safaricom, Kenya's biggest mobile operator launched M-Pesa in the country -- the first mobile payment scheme in Africa -- opening a floodgate for similar services across the continent.
South Africa, Madagascar, Uganda, Côte d'Ivoire, Senegal and Tanzania are among countries in Africa offering mobile money transfer services. However none of the payment services in these countries have attained the depth and reach that Safaricom has, analysts say.
On top of standard transfer services, the mobile operator also offers international remittance services, bank accounts, utilities payments, purchases facilities, cash cards -- in short, all the services that you expect from a traditional retail bank.
However, pricing structures governing payment services to be improved.
Joining the payment scheme offered by any of four mobile phone operators -- Safaricom, Orange in Côte d'Ivoire, Telma in Madagascar and MTN in Uganda -- is free. However, a customer might need to swap an existing SIM card for a new one in order to use the payment services.
At MTN Uganda, the SIM card swap is free for post-paid customers but prepaid customers will have to pay Ush1,500 ($0.64). Telma proposes a SIM swap at slightly over 2,000 Ariary ($1).
However, all four operators have restrictions on the payment services in favour of their own subscribers. This only encourages multi-SIM ownership. If a customer is not a subscriber of MTN Uganda or Orange Côte d'Ivoire or Telma Madagascar or Safaricom in Kenya but wants to use their mobile payment service, they will need to get that SIM card.
The "walled garden" commercial approach of mobile operators for payment services gets tougher when it comes to the fees charged for transfers.
The common denominator among the four operators is: If you transfer money to another mobile user registered to the service, the fee is rather small but if you transfer money to a person that is not registered to the service then the fee can be five to 20 times more.
At Telma, transfers to registered mobile users attract 250 Ariary ($0.13) for amounts between 100 Ariary and 5,000 Ariary ($0.07 and $3.7), but it will cost three times more to send the same amount to an unregistered user.
For higher amounts, the fee gap gets larger. It costs 3,000 Ariary ($2.2) to transfer between 1,000,001 and 5,000,000 Ariary ($731 and $3,652) to a registered mobile user but 3.6 times more to an unregistered user.
Safaricom in Kenya has similar price differences for the "on the network users" and "off the network users," with costs rising up to 7.5 times more to send the same amount of money to an unregistered user or a mobile user subscribed to another network.
At MTN Uganda, it costs Ush800 $0.34 to transfer between Ush5,000 and Ush1,000,000 ($2.12 and $425) to a registered user but twice more to an unregistered user and nearly 24 times more for a transfer for the highest amount of $425.
Orange money in Côte d'Ivoire offers its mobile payment services to its own registered users from as low as $0.36 for minimum amounts to $4.35 for amounts up to $217.4.
To withdraw the money, unregistered users are usually better off then registered users. At MTN Uganda, Telma and Safaricom, the withdrawal is free for unregistered users.
This explains also partly why the transfer charges are so high at the start for unregistered users or mobile subscribers of another network.
Transfer, withdrawal costs
For registered users, mobile operators split the cost of transfer and withdrawal between the sender and the receiver.
By spreading the cost, the service also appears cheaper. Further, the charges incurred by a registered user who is withdrawing the money are much higher than those incurred by the sender.
Mobile operators are very fine psychologists and they know a lot about human mentality: It is easier to part with money (withdrawal fee) that doesn't totally belong to you yet (the transferred money).
To withdraw Ksh35,000 ($850), it costs approximately Ksh170 ($20) with Safaricom.
MTN Uganda charges nearly Ush9,000 ($4) to withdraw Ush1,000,000 ($425) while Telma will ask for 6,000 Ariary ($4.4) to withdraw 5,000,000 Ariary ($3,652).
Despite the withdrawal fee that registered users have to pay, there is still a difference in terms of total cost (transfer and withdrawal fees) between a registered and an unregistered users or a mobile subscriber of another network.
At Telma, it is 1.2 times more expensive for an unregistered user -- 3,000 Ariary ($1.5) for the transfer and 6,000 ($3) Ariary to withdraw for a registered user, 11,000 ($5.5) Ariary to transfer and withdraw for an unregistered user.
At Safaricom, it is twice as expensive for an unregistered user -- Ksh30 ($0.35) for the transfer and Ksh170 ($2) for the withdrawal for a registered user and Ksh400 ($4.7) for the transfer and withdrawal for an unregistered user.
At MTN Uganda it is nearly twice as expensive -- Ush800 ($0.3) for the transfer and Ush9,000 ($3.7) for the withdrawal for a registered user and Ush19,000 ($7.9) for the transfer and withdrawal for an unregistered user.
Why this difference in prices between registered and unregistered users and a mobile subscriber of another network?
The processes behind the transfer and the withdrawal are the same for the two categories of users and therefore for the mobile operators, the cost should be the same too.
MTN Uganda's claim about "virtual banking, bridging the gap to the un-banked" sounds rather overdone when its mobile payment service is a two speed service: cheaper for its mobile subscribers and more expensive for mobile subscribers of other operators.
Is it interoperability between competing mobile payment services that will finally get rid off this "walled garden" commercial approach?
Let's see how mobile operators will position themselves when they will be faced with interoperability implementation. It will happen sooner than later.