M-Pesa hitches – let's innovate the next fintech solution

Tuesday March 10 2020

Two years ago, I wrote about the increasingly critical nature of the M-Pesa mobile service by Safaricom.

I argued then that it is too big to fail and the government through its regulator must give us better solutions - beyond the mantra that competition will sort out the risks arising from Kenyans having to over-rely on one service provider.

The unmatched success of M-Pesa mobile money service is ironically the biggest risk to Kenyans since it technically presents a single source of failure to the close to 90 per cent of the Kenyan mobile money subscribers.

The closest rival, Airtel money, controls less than 10 per cent of the mobile money market. Putting this into context, whenever M-Pesa sneezes, the rest of the Kenyan digital economy catches a cold.

Unfortunately, the sneezing has been happening once too often in recent times and for whatever the reason maybe, the regulator must stop pretending that competition will sort out the issue.

Indeed, four years ago, the regulator hired some international consultant to study the Kenyan Telco market with a view to seeing how to rectify the failure in the market, whereby despite existing competition, the market has failed to be competitive.


In other words, the market is indeed, legally speaking, liberal, open and competitive, but in practice we have a monopoly situation that is politely labelled as ‘a dominant player’ situation.

Dominant players do make good returns for their shareholders. They however introduce inherent risks such that in case of failure, however temporary that maybe, the wider economy suffers.

In economies where the competition is effective in practice, rather than just in law, the ability of one player to hold the wider digital economy in their hands is minimised.

This is because if the subscribers were evenly distributed across three or more players – the impact of failure would drop from, say, a high value of 90 per cent to a manageable value of 30 per cent.

How can we mitigate the risks arising from dominant players?


The consultant had some suggestions that included declaring Safaricom a dominant player in order to allow the regulator to execute measures intended to correct the market.

These included mobile money interoperability, infrastructure sharing, tariff control amongst others.

Some of these interventions were implemented but many were not. Issues of infrastructure sharing remain particularly controversial, with Safaricom arguing that some players would sit back and get a free ride on their investments.

For example, Safaricom has close to 200,000 M-Pesa agents scattered across the country, compared to Airtel's paltry 20,000.

If the different players in the sector were allowed to share agents, perhaps it would help break up the dominant position of Safaricom.

Whereas that maybe good for the consumer, it is obviously totally unacceptable from Safaricom’s perspective. Why would they be willing participants in any effort that is likely to destroy their dominant position?

Can the regulator crack the whip?

Maybe. Maybe not.

Either way, Safaricom’s dominance is unlikely to be broken through existing regulatory interventions. It will be broken through innovation.

Whoever comes up with the next generation M-Pesa innovation, will be the one who will eliminate the inherent risk that Kenyans face when 90 per cent of them are banking on a round-the-clock availability of the M-Pesa service.

Can the fintech innovators wake up and take the challenge? The traditional telecom competitors have obviously given up.

Mr Walubengo is a lecturer at Multimedia University of Kenya, Faculty of Computing and IT.

Email: [email protected], Twitter: @Jwalu