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August 21, 2018

Mobile Money Interoperability

A customer conducts a mobile money transfer, known as M-Pesa, inside the Safaricom mobile phone care centre in the central business district of Kenya's capital Nairobi in this July 15, 2014
A customer conducts a mobile money transfer, known as M-Pesa, inside the Safaricom mobile phone care centre in the central business district of Kenya's capital Nairobi in this July 15, 2014

In a move that marked the culmination of efforts by the ICT Ministry, the Communications Authority of Kenya and the various industry players, wallet to wallet interoperability went live on April 10 2018. This makes Kenya the second African country, after Tanzania, to effectively roll-out W-W interoperability.

Prior to the introduction of W-W interoperability, mobile money platforms in Kenya largely operated as ‘walled gardens’ wherein users of one platform could not directly transfer money to users operating on a second platform.

For instance, transfers from M-Pesa to Airtel Money would be regarded as a transfer to an unregistered user from M-Pesa’s end. Additionally, the recipient of the same would only be able to withdraw the transferred amount from an agent of the transferring platform.

This resulted in cross-platform mobile money transfers being unreasonably tedious, as well as financially strenuous, due to the increased charges of transferring to ‘unregistered users’.

However, this is now a problem of the past. Resultant of interoperability, users of one platform can now seamlessly send money to users of a second platform. Further, the cost borne by the user on cross-platform transfers has been reduced to the same level as that borne on transfers within the same platform.

It is expected that interoperability will directly result in a more unified and integrated digital payments ecosystem, thereby simplifying the overall consumer experience. Additionally, given M-Pesa’s 81 per cent market share in relation to mobile money subscribers, the move is expected to level the playing field thereby enabling other mobile money platforms to effectively compete with the market leader.

While the removal of competitive barriers is to be lauded, it is imperative to keep in mind that the interoperability debate is not only targeted at incentivising cross-platform competition. Rather, when viewed from a wider macro-economic lens, interoperability encompassed more than wallet to wallet transactions. It can be broadened to include wallet to service providers, bank to wallet, and wallet to merchant etcetera.

Interoperability, viewed in this sense, serves to move us further away from cash transactions, with digital payments ecosystems taking the forefront. Evidencing this, the World Payments Report 2017 predicts that global digital payments volumes will increase by an average of 10.9 per cent through 2020 to arrive at nearly 726 billion transactions.

With mobile money penetration in Kenya reaching a record 25 million active subscribers, the debate on a seamless digital ecosystem is of critical importance. The digital revolution is changing the manner in which we transact – be it with our banks, our trade partners or our service providers. The level of interaction places mobile money services in Kenya at a higher level than initially envisioned.

Mobile money can no longer be viewed as a product of one telco over another, but rather as a unifying platform that facilitates day to day transactions – an integral component of our financial eco-system.

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