Do banks block mobile money innovation in Africa?

A recent blog posting by Dr. Bill Maurer on the CGAP website spoke about mobile money’s innovation crisis. The author claims that nothing new has happened in mobile money since Mpesa was launched in Kenya, with the possible exception of the launch of Mkesho this year in Kenya as well.

Besides that development, he contends that everyone around the world is just trying to duplicate what Safaricom is doing in this space.

Why is this the case? Dr Maurer argues that,

“There may also be one partnership in particular that could be hampering innovation—that with the banks. Historically, these two players have taken very different strategies for new product development, especially in resource poor countries.”

Thinking big picture

The gap between these two players is gaping. You can send up to $500 for a cost of only 37 cents using Mpesa. On Zain it will cost you 74 cents. That’s an insanely low transaction cost compared to what banks charge, and that’s aside from the fact that you can’t even do transactions as low as 50 to 100 Ksh ($.60 to $1.24) in banks. And if that’s not enough — you can even store your money in Mpesa for no fee at all, unlike the usurious rates that the banks charge.

Simply put, banks cannot compete with mobile operators when it comes to transacting payments for the majority of Africans.

Regulators make and enforce the rules around financial services. How do they make their decisions, who lobbies them and why? Could the reason that we haven’t seen a true replication of Mpesa anywhere besides Kenya be due to the banking sector protecting its interests, now that they have seen the calibre of competition in Kenya?

Opportunity lost

Right now, anyone in Kenya can do any type of transaction within the national borders using Mpesa, and if creative, can transact into neighboring countries as well. A few other countries have the ability to do this type of thing as well, albeit less efficiently executed.

Opportunity is lost by local merchants not integrating mobile payment structures more efficiently into goods and services they offer to both businesses and the public. This is changing; businessmen are quickly figuring out new ways to increase margins and grow their customer base. But it is held back by the operators not willingly opening up their platforms for easier integration into business.

11% of Kenya’s GDP was shifted through Mpesa in 2009, and the company expects that figure to be closer to 20% this year.

Those are big numbers and they prove the massive potential of financial services tailored towards the circumstances of ordinary people. This begs two questions:

• Why has no one allowed it to truly be replicated in another country?
• Why is no one throwing big money after this and trying to figure a way to scale a mobile operator and “bank agnostic” payment solution across a whole region, if not the whole continent?

There are big players trying to break into the greater African market (I’m looking at you Naspers). There are banks who have the money to spend on figuring this out. But they aren’t thinking beyond their own brand, so they continue to fail. Maybe the answer is that we should just sit here and let all this lost opportunity continue to drift by us, while we wait on the big credit card players of the world like Visa or Mastercard to make their move.

That’s a fatalistic, passive stance, and I certainly hope it’s not the best we can do. Unfortunately, I don’t think we’ll see this service come from two guys coding and innovating in a garage somewhere. Instead, my hope is that somwhere there are mobile operators and banks banding together to make something bigger than themselves that make more profits for everyone. Failing that, then perhaps we could see a big investor arrive, willing to wager millions of dollars on the chance to make billions.