Kenya has rolled out a cross-network mobile money transfer service that is expected to increase the penetration of mobile money services and deepen financial inclusion in the country.
The interoperability system allows mobile money users to send money between the country's largest mobile networks, Safaricom and Airtel.
The wallet-to-wallet system allows users to seamlessly move money across Safaricom's M-Pesa and Airtel's Airtel Money.
Over the past decade, cross-network mobile money transfer has been hampered by complexity and high costs.
Before the activation of the system, sending money from an M-Pesa account to an Airtel Money account cost 30 per cent more and would not reflect in a receiver's mobile money wallet.
The withdrawal process proved to be even more cumbersome, involving at least four steps since one could only withdraw from the sender's network agent.
"From the customer's point of view, this is a very good initiative that will ensure inclusivity in the long run," said Dr Bitange Ndemo, a lecturer at the University of Nairobi.
Telkom, the country's third largest mobile network which relaunched its mobile money service T-Kash in March, will join the system later.
Reaching unbanked masses
"Customers can now send and receive money directly into their mobile money wallets across networks. This seamless service offers users the flexibility and convenience to use their money without having to withdraw it like in the past," Airtel Kenya said in a statement.
Globally, at least 16 countries, India, Indonesia, Madagascar, Mexico, Nigeria, Pakistan, Peru, Philippines, Rwanda, Tanzania, Kenya, Thailand, Bolivia, Egypt, Philippines and Jordan, have some degree of mobile money interoperability, but ease varies in the number of cases that are fully interoperable and volumes of the transactions.
According to a 2017 report by GSMA, a trade body that represents the interests of mobile network operators worldwide, mobile money accounts are slowly replacing traditional bank accounts in sub-Saharan Africa, as the region sees mass adoption of mobile money, which has enabled millions of people to access financial services.
A report titled The Mobile Economy: Sub-Saharan Africa 2017 shows that there were about 277 million registered mobile money accounts in the region at the end of 2016 while the number of live mobile money schemes had reached 140 across 39 countries, which accounted for more than half of the 277 mobile money deployments worldwide.
Traditionally recognised as the pioneer of mobile money in the world, interoperability marks another significant milestone for Kenya which was ranked first globally in terms of financial and digital inclusion by the Brookings Institution in 2017.
The implementation of the cross-network money transfer in Kenya is part of the recommendations of a report by Analysis Mason that led the Communications Authority to probe allegations of market dominance by Safaricom but some analysts believe that the service may not yield much to that effect.
"With the digital disruption that is taking over every industry, I doubt that government-led interventions will have much impact in ensuring a level playground. Staying in business requires more of creativity more than regulation," said Dr Ndemo.
The lack mobile money interoperability was cited by telecom companies as the biggest driver of market dominance. We hope the implementation of cross-network money transfer will solve of those issues" Mr Mucheru said.
Safaricom remains the market leader in Kenya's telecoms sector with 71.9 per cent market share, ahead of Airtel at 14.9 per cent and Telkom Kenya at 8.4 per cent.
Roping in agents
Since the launch of interoperability in Tanzania, with Tigo seeing a 17 per cent increase in the value of external inbound or internal outbound money movements while Airtel averaged a 10 per cent growth in the interoperable Peer-to-Peer (P2P) product segment with over $16 million is processed in interoperable transfers every month between 2014 and 2016.
However, interoperable P2P transfers between providers still make up only a small percentage of overall P2P transfer value and volume -- estimated across providers to be 6-8 per cent of total P2P transfers.
Across Africa, cross-network mobile money transfer systems are gaining popularity with countries like Ghana and Zimbabwe pushing for implementation of interoperability in 2018. Users, however, believe that more safeguards need to be put in place before this is rolled out.
"The new service is big for mobile money because I can now send money to people in other networks but we still need to be more efficient because as of now I am still using two mobile wallets," Roy Nyamare, a Kenyan mobile money user said.
Kenya, like most countries has only implemented platform-level interoperability, leaving out agent-level interoperability which permits agents of one service to serve customers of another service and customer-level interoperability, which permits customers to access their account through any SIM card.