Consumer Risks and Rewards Amid Increased Competition in Kenya

Change is upon us. After eight years of market dominance Safaricom’s M-PESA seems to have finally met a potential contender, the banks. Data from The Helix Institute of Digital Finance shows that between 2013 and 2014 banks in Kenya (in particular Equity Bank) have aggressively grown their agent networks, and now account for 15% of the agent market share, up from 5% in 2013. In addition to increased touch points, banks have introduced a greater diversity of sophisticated offerings to the market, such as savings and credit. Both product development and the growth of the agent network are moving in the right direction to provide customers with more options, in a more competitive market.  

While this change is exciting, we must also remain mindful of the risks these developments pose to customers, and how to mitigate them in order to drive trust and activity on the network. In CGAP’s recent publication "Doing Digital Finance Right: The Case for Stronger Mitigation of Consumer Risks," seven key customer risk areas were identified. This blog will draw on three of these risks related to agents:

  1. Inability to transact due to network and service downtime
  2. Insufficient agent liquidity or float impacting ability to transact
  3. Poor customer recourse at the agent level

Inability to transact due to network/service downtime

Although service downtime has markedly improved in Kenya, with agents facing a median of two downtimes per month compared to nine in 2013, users still complain of system and network downtime preventing them from completing transactions, and posing significant risks as a result.  

Over the years, platform migration has been a key area of investment for providers as they try to overcome restrictions on growth due to limited functionality and capacity. Following the trend, earlier in the year Safaricom upgraded to a second generation (‘G-2’) platform, now hosted and managed in Kenya and with the ability to handle up to 900 transactions per second.

For now, banks have a comparatively low number of transactions flowing through their systems. However, as activity increases they must remain cognizant of how much traffic their platforms can handle, how they communicate downtimes in advance to agents, and how they work with telcos to ensure advanced warning about mobile network downtimes. Our Kenya ANA data reported that only 17% of bank agents, compared to 85% of telco agents, receive prior warning of downtime.

Insufficient agent liquidity or float impacting ability to transact

In 2013 and 2014, Kenyan agents ranked ‘lack of resources to buy enough float’ as their second biggest barrier to increasing daily transactions. This is mirrored in Intermedia’s demand side data, in which 55% of Kenyan users interviewed said they ‘had problems with an agent lacking sufficient e-float and sufficient cash to complete transactions’.  

Extending credit to agents is often cited as a quick win in terms of alleviating liquidity issues, but it may be more complex than we think. During interviews carried out with 40 agents in Kenya, some interesting insights into liquidity management emerged. It appears that some agents falsely report being out of float in order to reserve it for their loyal customers, or opt not to rebalance due to either indecisiveness as to how much to invest, or fear of being robbed or defrauded. 

To add to these enduring challenges, in July last year Safaricom removed its exclusivity clause opening up their network to rival providers. Although this has a positive impact in terms of an added revenue source for agents, non-exclusivity forces them to manage multiple pools of liquidity simultaneously, and therefore can further complicate the process of rebalancing. This is especially applicable for banks whose agents are increasingly non-exclusive (74% in 2014), compared to their mobile network operator (MNO) counterparts (12%), and carry out higher value transactions (median value of $33 per day, compared to $22 for banks). 

Poor customer recourse at the agent level

Given the negative experience customers often encounter with customer care offices and call centers, it is no surprise that they often look to agents to resolve their issues. But are agents able or willing to provide adequate service in return? 

Although an impressive 89% of Kenyan agents report receiving initial training, only 29% are subsequently retrained and, therefore, may be unaware or unsure of new products and processes. Beyond training, their experience with customer call centers appears to be as dire as their customer’s. When asked to rank the major barriers to expanding their mobile money business, agents in Kenya rated ‘dealing with customer service’ second, ahead of threat of armed robbery.

Figure 1: Major Barriers to Expanding Digital Finance Business
Agents ranked the top three barrriers out of eight dimension in 2014. In 2013, agents were asked to rank all seven dimensions. The above figures are a weighted average of the first three choices for both years and then converted to an index in order to draw comparisons. The taller bars mean a higher ranking. Source: Agent Network Accelerator Survey – Kenya Country Report 2014

In terms of willingness, regular agents are used to selling fast-moving consumer goods such as cigarettes and Coca-Cola, which are quick, easy transactions. They are not accustomed to spending time helping customers deal with service problems they encounter. Through sophisticated analysis of our agent data, we see direct correlations between good customer service and increased business, with the agent’s ability to answer a difficult question about a mobile money policy increasing their transaction volume by over 10%

Banks are bringing in a greater diversity of services, beyond the popular cash-in/cash-out and bill payment products championed by MNO providers. As service offerings become more varied and complex it will become increasingly important for providers (especially banks) to identify sophisticated segments of agents that can explain these offerings and help customers deal with problems that arise. 

“I am glad to see that customer recourse is beginning to become a central focus for all the providers.” Kimathi Githachuri, Founding Head and Lead Consultant of The Helix Institute of Digital Finance, during the CGAP “Doing Digital Finance Right” event on June 29, 2015.


Although an exciting and much needed development, the rapid growth of bank agents in Kenya comes with both its risks and rewards. Not only must banks ensure that their systems and processes develop at the same speed with which the market matures, but also that competition on the ground remains healthy. Ensuring that customers are supported and protected every step of the way is a prerequisite to increased uptake and usage, and is particularly true for new and more complex products. Data from The Helix Institute of Digital Finance and MicroSave’s “A Question of Trust” study, along with CGAP’s landmark Focus Note highlight the damage these risks are doing to consumers’ trust in, and thus use of, digital finance. Those providers wishing to sprint ahead and drive healthy margins from their digital ecosystem, will need to respond accordingly. 



This Focus Note explores consumer risk in digital finance—-particularly through the lens of lower-income and less-experienced consumers.


17 July 2015 Submitted by Dr Martina Mutheu (not verified)

The analysis clearly outlines areas of concern. Although most of the issues identified may have been resolved, the greatest risk currently is fraud as assistants as said are not regulary trained and informed on fraud trends in the market. Agents loose huge sums of money particulary in m-pesa where agents operate with substantial float. unfortunately there is no mechanism in place by the banks or MNOs to follow up these incidents with cybercrime specialists. Another risk to both the agent and customer is the downtime particlulary for third parties. various financial institutions have partnered with MNOs and Banks but through a developer or an entity with content provider license. There are issues of delay or cancelled transactions which may not auger well for adoption as providers are forced to hear it from their contact agent and not directly from the service provider whcih causes delay and confusion. Another challenge is tariffs particulary when moving money from bank to an MNO and again withdrawing from the agents, customers are charged exorbitantly and again the unbanked will always shy away from what is seemingly unaffordable. Furthermore all savings done from MNO wallets carry a transaction fee. So the same funds are subjected to tariffs at various points in the chain making it unreasonably expensive. Mobile money in Kenya has become part of peoples live and there is need for clear policy to guide operations. There should be clear assistance in following issues of fraud, clearly stipulated, when the thugs know that they cannot get away with fraud, incidents will reduce. As of now when you report of a fraud incident the furthest customer care does is to tell you, that the money was deposited to another person and has already been withdrawn and end of story. I find these irresponsible considering the kind of stability these institutions have, its very easy to engage either the cybercrime departments in the country on behalf of clients or set up a hightech cybercrime department within their establishments. On tariff issues, since we are keen on financial inclusion, there is need to differentiate paybills and pure savings. for a person to be enticed to save, there should be a deliberate effort to make it as appealing as possible in essence savings need to be free. Let customers pay for requested services like checking balances, changing pins, statements i.e services that would be charged even at the bank branch.

19 July 2015 Submitted by Dorcas (not verified)

Great insights Annabel! These concerns are negatively impacting customer registration and usage of digital financial services.I think it's high time providers addressed them before questions about accountability for, and ownership of, these risks become too persistent and pronounced.
As for me, an active mobile money user in Kenya, agent illiquidity is my biggest nightmare especially when it comes to cash in.

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