Why Blockchain is death knell for Mpesa

Mpesa down for maintenance for the umpteenth time this year

In Kenya, mobile money is basically issued electronic money on a SIM card, backed by Bank deposits at a local bank — the Commercial Bank of Africa. Unfortunately, Telecommunication companies like Safaricom own all the SIM cards on phones in Kenya. Safaricom owns 65% of all SIM cards in Kenya. This is not good for a healthy competitive market that gives mobile phone users options.

So, for a while, only Telecommunication companies could issue electronic value on mobile phones, and this is what has led to their dominance.

Today, utility companies like KPLC, deposit taking micro finance institutions like Faulu Kenya, Savings and Credit Cooperatives like STIMA Sacco, Non banking financial institutions like Post Office Savings Banks Kenya, and all Kenyan Banks have to go through Safaricom and Mpesa. They have to pay a gatekeeper fee.

For example

Mswhari’s mobile lending product delivered via Mpesa shares interest from loans at a ratio of CBA 70:30 Safaricom. CBA bears all the risk of non-performing loans (NPLs)
KCB Mpesa’s mobile lending product shares interest from loans at a ratio of KCB 80:20 Safaricom. KCB bears all the risk of non-performing loans (NPLs)

Why is this so? Yet, everyone has a mobile phone and cash in cash out agent points are not exclusive?

Digital currency cash in — cash out agent in Nairobi

Kenya’s Hybrid Bank — Telcos Success Story

Equity Bank (Equitel), now both a Bank and Telecommunications company, realized the folly of this arrangement way before most Kenyan banks. What did they do?

Equity Bank launched its own Equitel SIM card — a bank on a SIM and invested in expanding their agency network. Equitel, operated by Finserve Africa — Equity Banks’ mobile virtual network operator (MVNO) — combines both banking and telecoms services including voice, data and SMS on a single SIM card. Today, it has grown its customer base up to 2.5 million prepaid SIM wallets in less than 3 years. A remarkable achievement. In comparison, Safaricom Mpesa has 16 million prepaid SIM card wallets.

In the Q3 2016, Equitel moved 139 Billion making it the second biggest money transfer service in Kenya with 15% market share behind Safaricom’s M-Pesa via TechWeez

Why Kenyan Firms needs Block chain Technology

The emergence of block chain technology and an increase in use of smartphones by young East Africans, presents a watershed moment for Kenyan banks, NBFIs, MFIs, SACCos, Retailers and Utility companies — any firm really. Block chain is an opportunity for firms to use this open technology, with no gatekeeper fees, to front run mobile money issuers such as Mpesa.

It is a shame that 10 years after launch, Mpesa does not have a smartphone prepaid wallet, that i cannot view my payments history and have to run multiple screens to make a simple payment — its clunky, it is old, it is about time for alternatives. As a prepaid SIM wallet, it has been unable to morph to the age of smartphones, severely limiting what is possible and much needed features in this market.

Why can’t KPLC issue its own electricity tokens on a digital wallet that runs on a smartphone? Or even blockchain SIM card? Or a digital wallet on a cloud accessible via USSD on a feature phone?

Why not?

The marginal cost of introducing digital currencies is nearing zero thanks to ubiquitous mobile phones and an expansive agent network for cashing in and out into electronic values. Agent networks are also non-exclusive and anyone can tap into them for cash in cash out service. Banks, MFIs, SACCOs, NBFIs already have agent networks, what they lack is open access for all technology to enable them to issue digital currencies.

The time for digital currencies in Kenya is now!