The Competition Authority of Kenya has ordered all mobile money service providers, including Safaricom, to disclose all mobile money service fees payable by consumers for USSD (unstructured supplementary service data) based transactions.
The new regulations which were introduced late in 2016, require customers to be informed of all fees prior to the completion of a transaction. This directive comes following concerns over lack of transparency in billing of customers, as well as allegations of Safaricom charging high fees for mobile money services.
The intervention is part of an effort by the authority to promote price awareness and product comparisons in the mobile money market particularly given competition concerns that have previously arisen in the provision of USSD in Kenya and other markets. These concerns typically relate to potential abuses of market power by dominant mobile network operators (MNO). In 2013, Zimbabwe’s largest MNO initially refused to allow banks access to its mobile money service platform (EcoCash) and later Econet charged banks far more for accessing its USSD service than it cost to provide the service.
Recent positive developments in Kenya are that Safaricom will lower its USSD charges for financial transactions through its network. Under a signed agreement between the CAK and Safaricom, the mobile operator is expected to cut prices from between Sh2 and Sh5 per USSD session and occasionally as high as Sh10, down to just Sh1 (about $0.01). This decision to reduce USSD rates comes after a market inquiry commissioned by the CAK and undertaken by a team which included economists from CCRED.
The inquiry was driven by concerns over USSD pricing structures which prevented effective competition between financial institutions and Safaricom’s mobile money (M-Pesa) service.
Disclosure and transparency of pricing and information availability is an important part of the competitive process in most markets. In mobile money or telecoms services, it allows consumers to switch between mobile money service providers or competing networks.
As such the service providers face competitive pressure to maintain lower prices and/or better range and quality of services to retain customers. Competition issues in mobile money service provision can be heightened in a market where there is an incumbent with significant market power and the market is not contestable due to consumer inertia. Therefore enabling competition on the demand side through regulation that encourages transparency in prices and customer switching can have a positive impact on competition.