The complexity and range of mobile money-related services provided in various African countries has grown significantly from ‘basic’ money transfer between people with customers storing currency in a mobile wallet via a handset, to include savings and loan products, insurance and bill payments.1 Much has been written about the benefits of this functionality including through accessibility, convenience, speed, privacy, cost-effectiveness and control over financial transactions.2
In keeping with the dynamism in the product space, the models and partnerships used to deliver the various services have evolved, allowing for the participation of new players in the market and going beyond the now traditional MNO-led platforms. This article discusses the role of these new intermediary players such as aggregators and enablers in stimulating competition and innovation in the provision of mobile financial services. It also considers recent competition cases in Kenya and Uganda relating to aggregators.
Innovation and competition on the supply-side
Through various mobile money platforms a customer can now pay for utilities such as electricity and water, make bill payments such as to schools, hospitals and restaurants, and make every day purchases for groceries and services using mobile payments.3 Merchant payments grew by 58.5% globally from 2013 to 2014 with a third of this growth occurring in East Africa.4
In some countries Mobile Virtual Network Operators (MVNOs) have entered the market to take advantage of the rapid growth in the sector. An MVNO is a company that provides mobile telecommunications services without owning any telecommunication infrastructure of its own, leasing instead from an existing MNO.5 Equitel in Kenya and Smart Money in Uganda are examples of MVNOs that supply mobile money services. The rise of MVNOs has also led to the growth of aggregators and enablers who serve as intermediaries between incumbent MNOs and smaller MVNOs.6 Aggregators provide the platforms and technical know-how to link payments between the MNOs and MVNOs while enablers in addition to the function aggregators serve, may also sell services directly to customers and billers such as utility companies, schools, hospitals and other retailers.7
Aggregators and enablers stimulate the industry by bringing on board more clients and billers to make use of the mobile systems and infrastructure. They are also usually at the forefront of creating and developing technology to facilitate mobile systems.8 This could result in a larger customer base for MNOs. Some aggregators such as Ezee Money in Uganda also have agents that increase public access to mobile money services. However, by having direct access to customers and billers, enablers may appear to position themselves as rivals with MNOs. Moreover, most of these firms are network agnostic which grants customers on a network with less subscribers, access to a variety of products and services including transfer of products to customers on a more dominant network thus presenting a threat to an incumbent MNO’s dominance.
Recent cases in Uganda and Kenya
There is a growing record of MNOs in the region engaging in practices (some of which are anti-competitive) in an effort to protect their dominance. These interlinked practices include refusal to have interoperability,9 agent exclusivity, and margin squeeze in relation to Mobile Virtual Network Operators (MVNOs) where access to platforms is required as discussed in previous editions of this Review.10 Aggregators and enablers are particularly susceptible to anti-competitive conduct by MNOs because they are dependent on the MNOs for access to essential facilities such as USSD codes and to the mobile network.
In Uganda, MTN, the dominant firm in the sector was fined Ug Shs 2.3 billion (approximately $662 000) in 2015 for alleged anti-competitive conduct.11 Ezee Money had obtained a contract in which MTN would supply them with digital transmission as well as 30 fixed lines. It then contracted Yo! Uganda Limited, an aggregator, to implement the service which would enable Ezee Money customers to subscribe for ‘e-money’ services. However, MTN withdrew the contract citing Ezee Money’s position as a rival. It went further to pressure Yo! Money to breach its contract with Ezee Money and also restricted its mobile money agents from dealing with Ezee Money. MTN’s actions in this regard resulted in a 79% drop in the number of transactions that Ezee Money’s agents handled. The court found MTN to have acted anti-competitively. MTN’s defense for the allegations was that Ezee Money is not a licensed communications provider.12
A similar case has been lodged against Kenya’s dominant mobile money operator, Safaricom. In November 2015, Lipisha, an aggregator that enables businesses to conduct bulk payments through mobile money, accused Safaricom of coercing Lipisha to stop services to their biggest customer, BitPesa.13 A court ruled that the case can go ahead and currently awaits another court appearance. A favourable judgement would mean that bitcoin could also be transferred by means of a mobile network such as Safaricom or Airtel,14 thus adding a completely new dimension to mobile payment systems. Safaricom argued that it was complying with anti-money laundering regulation. In July 2014, Safaricom used a similar argument when it objected to Equity Bank’s launch of ‘thin sim card’ technology.15
The two cases illustrate that while aggregators and enablers perform an important role in stirring innovation and competition, driving subscriber growth and facilitating bill payments, incumbent MNOs face incentives to restrict their growth in the market. Even as regulation continues to develop to govern the industry, there is a need to consider the role of smaller players such as the MVNOs, aggregators and enablers given their contribution to the industry. These intermediaries have the potential to enhance growth in the industry particularly in countries like Uganda where the evolution and adoption of mobile money offerings has been very slow especially when compared to their East African counterparts. Aggregators and enablers develop and maintain the platforms necessary to process bulk and merchant payments which are growing significantly. They also play an important role in customer acquisition and retention allowing the MNOs to more efficiently use their infrastructure.16 In countries where there is no competition law or competition authority, such as Uganda, there is a clear role for regulators in preventing the foreclosure of these players in the industry.
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1. Paelo, A. ‘Mobile Money: Taking on the Big Banks’ (April 2014). CCRED Quarterly Review; Kamukama, N and Tumwine, S. (2012). ‘Mobile Money Services: A Liquidity Threat to Uganda’s Commercial Banks’. African Journal of Accounting, Economics, Finance and Banking Research, Vol. 8 (8), p.33-46.
2. See note 1 and Robb, G. and Vilakazi, T. (2015). ‘Mobile Payments Markets in Kenya, Tanzania and Zimbabwe: A Comparative Study of Contestability and Outcomes’. CCRED Working Paper, No. 8/2015.
3. GSMA. (2014). ‘State of the Industry. Mobile Financial Services for the Unbanked’. GSMA.
4. See note 3.
5. Kiiski, A. (2006). ‘Impacts of MVNOs on mobile data service market’. In 17th European regional ITS conference.
6. Strategy&. ‘Mobile Virtual Network Operators at the Gate: The Rise of Service-Based Competition in the MENA Region’ (4 December 2011). Strategy&.
7. Ghadialy, Z. ‘MNO, MVNO, MVNA, MVNE - The different types of operators’ (1 April 2014). The 3G4G Blog.
8. See note 7.
9. Robb, G. and Vilakazi, T. (2015). ‘Mobile Payments Markets in Kenya, Tanzania and Zimbabwe: A Comparative Study of Contestability and Outcomes’. CCRED Working Paper, No. 8/2015.
10. See Paelo, A. ‘Mobile Money: Taking on the Big Banks’ (April 2014). CCRED Quarterly Review and Nleya, N. and Robb, G. ‘Part Two: Mobile Money in Kenya and Zimbabwe’ (November 2014). CCRED Quarterly Review.
11. Kiyonga, D. ‘MTN fined Shs 2.3bn for sabotaging competition’ (16 November 2015). The Observer.
12. See EzeeMoney (U) Limited v MTN Uganda Limited, Civil Suit No.330 of 2013 and Kasozi, E. ‘MTN appeals Shs 2.3bn court award to EzeeMoney’ (18 November 2015). The Daily Monitor.
13. Balancing Act. ‘Kenya: Mobile Money Providers Sue Safaricom for Service Stoppage’ (27 November 2015). Balancing Act.
14. Wong, J. I. ‘Kenyan High Court Hears BitPesa Case Against Safaricom’ (26 November 2015). Coin Desk.
15. Allison, I. ‘Bitcoin versus M-Pesa: Digital payments rumble in the jungle’ (1 December 2015). International Business Times.
16. Kwan, H. and Greening, M. (2015). ‘Mobile Virtual Network Enablers: Winning in an Increasingly Crowded Market’. Cartesian.