Why Equity Bank Felt It Had to Become a Telco – Reluctantly
In April 2014, the Communications Commission of Kenya licensed three companies with Mobile Virtual Network Operator (MVNO) licenses. MVNOs ride on the communications infrastructure of existing mobile network operators to provide services to end users. Equity Bank, the largest bank in Kenya, has received one of these licenses and will be using SIM overlay technology to allow additional functionality to operate independently of the SIM itself. In this blog, Ignacio Mas and John Staley explain Equity Bank's decision to become an MVNO.
Photo Credit: Jay Bendixen
If you are an African gadget manufacturer, you do not want to have to produce your own electricity to run your machines. But if your local electricity company's service is unreliable, you take matters into your own hands: you buy a generator or solar panels. Now you are in the electricity generation business, and you may even sell some back to the grid. Would this be a case of gadget-electricity convergence? Would that be a case of you wanting to eat the electricity company's lunch? No: you did it because you wanted to retain control over your business. Total dependence on a single electricity supplier would have simply become unacceptable.
Interesting. I wrote something in the same vein yesterday.
Great minds thinking alike perhaps:
With the Launch of Its MVNO, Mobile Money Service, Equity is Responding to an Existential Threat
Equity bank provides one of the three thrust necessary to release the grip of the MNO on the Kenyan market; The other two data and voice, equity is going after VAS:-if apart from delivering its own services it provides an available and affordable VAS platform, then we might see a 100B $ global company from Kenya in the near future:
Then equity itself needs to be countered otherwise it might fall pray to its own success.
I think that the route Equity have taken is interesting but the article implies that the Telco's should be regulated against for banking type services. I am not sure I agree. Firstly I don't think M-Pesa would have been successful if the regulator had been too onerous in the beginning - we can see the impacts of heavy regulation in other countries and it stifles uptake. Secondly you should look at the example of Mpesa's M-Shwari savings and loans product - this is a partnership with CBA bank. CBA have gone from being a fairly small player in the Kenyan retail banking sector to being number 2 in just 12 months. This is a happy example of Bank and Telco partnering for mutual benefit. In my view Equity simply want to own all the financial transaction (if they make some money out of the telco bit that's great too). - they want the velocity of money in their system and not the Telco's - its simple. You say that want end to end control of the customer experience - but this only relates to the SIM based Menu - they are still dependant on the Airtel SMS or USSD network to transmit the transactions. Don't get me wrong, I think it's a bold move by Equity but really the only move they could make where they have lost the competitive advantage - but lack of regulation around telco's and mobile money is not to blame.