Behind the widening tussle over thin-sim technology

After Equity Bank decided to directly play in the mobile money market by issuing its own SIM cards, we debated heatedly in a previous blog whether Safaricom had finally met its match. 

At the time, it was assumed that Equity would be selling the traditional SIM card, which would require customers to either buy dual-SIM-card phones or carry two phones in order to access services from two existing providers.

Even within the inconvenient scenario above, Equity, with its large customer base, was bound to pose some significant competition to the leading mobile money provider Safaricom. 

The surprise, it seems, is the secret weapon Equity unveiled recently in the form of a thin SIM card.

The GSM Association (GSMA), the folks in charge of defining mobile technology standards describe thin SIM cards as follows:

“The Overlay SIM (Thin-SIM Card) takes the form of a thin plastic sheet into which a chip is embedded that can be placed on top of a standard SIM card within a mobile device. The Overlay SIM sits between the SIM card and the device and has access to and full visibility of all communications taking place between those two elements”

It may sound technical to most of us, but in simpler English, thin-SIM-card technology will allow customers to access services from two mobile service providers without having to buy dual-SIM-card phones. 

PENETRATION PRICING

The second SIM card is a paper-thin plastic sheet that adheres to the original SIM card. The customer is then able to enjoy all services from either operator at no additional switching costs.

As if this technology were not disruptive enough, Equity intends to offer its mobile money transaction fees at what marketers call “penetration” pricing; meaning they are likely to charge the bare minimum (at cost) in order to penetrate and eventually dominate the mobile money market. 

Additionally, they intend to plug into their back-end banking system, thus providing their customers the ability to seamlessly transfer or receive funds internationally straight from their mobile phones.

No so fast, says Safaricom, who have filed a complaint to the communications regulator citing security risks related to thin-SIM technology. 

Safaricom argues that the overlay SIM card would be able to access data from the original SIM card, hence exposing important, sensitive customer data such as PINs and text messages, among others.

THE 'RISK IS THERE'

Equity argues that the technology is safe, and is in fact widely used in China and Singapore, among other countries. So who is fooling who in this unending saga?

GSMA has published a report on the matter that cites the security risks mentioned by Safaricom. However, in the same report, GSMA states that these risks can be overcome depending on the quality of the implementation teams as well as the legislative and regulatory environment within which the technology is deployed.

Put differently, the risk is there, and whether or not it can be exploited will depend on the way the technology platform is implemented and the nature and maturity of the regulatory framework for the same. 

Specifically, the compliance mechanism in terms of ensuring that security standards and procedures outlined by the regulator are enforced at all times must be top-notch and sustainable.  

Any failures in implementation and regulation could lead to millions of customers being dangerously exposed to the security vulnerabilities of thin-SIM technology.

RESTRAINT BY PARLIAMENT

In concluding, I must mention that it is quite mysterious that this issue found itself in a parliamentary committee for deliberation. Ideally, the regulator should be left to sort this out and if one of the parties feels aggrieved, as per the Kenya Communications Act (2013), the next stage should be the Multimedia Appeals Tribunal.

Subsequently, if one party is still not satisfied, then they can proceed to the High Court for arbitration.

Whereas the new Constitution gives wide-ranging powers to parliamentary committees, these powers should be used sparingly and should respect the independence of regulatory institutions by allowing them to complete their mandates instead of pre-empting them.

But back to the question of who is fooling who in this thin-SIM-card saga. The regulator will decide. If they provide and enforce a solid regulatory framework for thin-SIM-card technology, then Equity Bank will be proved right — nothing to worry about. If the regulatory and particularly the compliance framework is lacking, then Safaricom will be able to say “I warned you guys”.

Mr Walubengo is a lecturer at the Multimedia University of Kenya, Faculty of Computing and IT. Twitter:@jwalu