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New entrants in the Telco Industry
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Rankaz13
#11 Posted : Wednesday, April 16, 2014 12:04:14 AM
Rank: Elder

Joined: 5/21/2013
Posts: 2,841
Location: Here
MKWASI wrote:
The new entrants Equity Bank and Zioncell Kenya, will they revolutionalise this industry?

My thinking has always been that Mpesa is 'pure theft'. My believe is founded on, Mpesa was supposed to assist mainly the unbanked population, small traders etc A small trader, for example a shop owner gets 50 cents profit or 1Ksh for each item sold. To send Ksh 5,000 in Mpesa would cost the trader ksh 33 and the other trader will use Ksh 66 to withdraw. Thus the trader will have to sell 33 items and the other trader 66 items to be able to make a single mpesa transaction of Ksh 5000. Won't this impoverish the traders more?

I may be wrong, the tariff should be extremely low for it to achieve the initial intended objective.

I hope the new entrants will make this facility cheaper for the unbanked population.


You forget one critical element that also goes into the transaction costing: commissions for the agents.

Reality is, if the service becomes too cheap, commissions/margins for the agents become squeezed and operations become unattractive. It then becomes very difficult to recruit new agents and retain existing ones. Incidentally, these aren't my words but those of an industry insider.

Apparently, this is the problem that has bedevilled Airtel's money transfer service. It's cheaper tha mpesa, yes. But where are the agents?
Life is like playing a violin solo in public and learning the instrument as one goes on.
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stocksmaster
#12 Posted : Wednesday, April 16, 2014 9:54:15 AM
Rank: Member

Joined: 9/26/2006
Posts: 463
Location: CENTRAL PROVINCE
Rankaz13 wrote:
MKWASI wrote:
The new entrants Equity Bank and Zioncell Kenya, will they revolutionalise this industry?

My thinking has always been that Mpesa is 'pure theft'. My believe is founded on, Mpesa was supposed to assist mainly the unbanked population, small traders etc A small trader, for example a shop owner gets 50 cents profit or 1Ksh for each item sold. To send Ksh 5,000 in Mpesa would cost the trader ksh 33 and the other trader will use Ksh 66 to withdraw. Thus the trader will have to sell 33 items and the other trader 66 items to be able to make a single mpesa transaction of Ksh 5000. Won't this impoverish the traders more?

I may be wrong, the tariff should be extremely low for it to achieve the initial intended objective.

I hope the new entrants will make this facility cheaper for the unbanked population.


You forget one critical element that also goes into the transaction costing: commissions for the agents.

Reality is, if the service becomes too cheap, commissions/margins for the agents become squeezed and operations become unattractive. It then becomes very difficult to recruit new agents and retain existing ones. Incidentally, these aren't my words but those of an industry insider.

Apparently, this is the problem that has bedevilled Airtel's money transfer service. It's cheaper tha mpesa, yes. But where are the agents?


An mpesa agent doing about 80 transactions per day makes about 25-30k per month in commissions. Deduct the minimum wage for 1 employee (13k) and minimum rent for a stand alone mpesa shop (15k) and u realise majority of these agencies from a purely business perspective do not make economic/business sense. The Equity and KCB agencies are even worse averaging less than 20k for most agents.

Based on this, its hard to see how the likes of Equity can undercut mpesa by lowering commissions which would also reduce the already meagre agents commissions.

Happy hunting.
x handle: @stocksmaster79
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  | | Edit by user: Wednesday, April 16, 2014 9:56 AM | Reason: Not specified
Sasha
#13 Posted : Wednesday, April 16, 2014 10:14:46 AM
Rank: Veteran

Joined: 9/5/2007
Posts: 627
There are already alternatives to Mpesa. Most banks now have billers on their mobile banking platforms. You now don't need to move money from your account to Mpesa (which will cost you about Kshs 60), the pay a biller through their paybill which will cost you another Kshs 33 - 105 depending on what you are paying for.

Most pay tv and utility companies have already integrated to banks and they offer account to account transfers at minimal cost to you. SCB, I&M, Barclays, BOA, Ecobank, NIC among others have this!
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berns
#14 Posted : Wednesday, April 16, 2014 10:16:09 AM
Rank: New-farer

Joined: 2/8/2013
Posts: 27
@stockmaster anyone doing a stand-alone Mpesa or Equity agency is also economically daft. Most have a supporting business in the same rental space to subsidize rent n infact dont hire staff for the Mpesa function.
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MKWASI
#15 Posted : Wednesday, April 16, 2014 12:19:58 PM
Rank: Member

Joined: 4/20/2012
Posts: 888
berns wrote:
@stockmaster anyone doing a stand-alone Mpesa or Equity agency is also economically daft. Most have a supporting business in the same rental space to subsidize rent n infact dont hire staff for the Mpesa function.


This should have been the model. There should be no standalone agents. The agents should be existing businesses, thus mobile transfer business just one of their income source among other sources.

@stockmaster currently you find numerous agents in one location,It does not make business sense.
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  | | Edit by user: Wednesday, April 16, 2014 12:26 PM | Reason: omission
MKWASI
#16 Posted : Wednesday, April 16, 2014 12:24:27 PM
Rank: Member

Joined: 4/20/2012
Posts: 888
Rankaz13 wrote:
MKWASI wrote:
The new entrants Equity Bank and Zioncell Kenya, will they revolutionalise this industry?

My thinking has always been that Mpesa is 'pure theft'. My believe is founded on, Mpesa was supposed to assist mainly the unbanked population, small traders etc A small trader, for example a shop owner gets 50 cents profit or 1Ksh for each item sold. To send Ksh 5,000 in Mpesa would cost the trader ksh 33 and the other trader will use Ksh 66 to withdraw. Thus the trader will have to sell 33 items and the other trader 66 items to be able to make a single mpesa transaction of Ksh 5000. Won't this impoverish the traders more?

I may be wrong, the tariff should be extremely low for it to achieve the initial intended objective.

I hope the new entrants will make this facility cheaper for the unbanked population.


You forget one critical element that also goes into the transaction costing: commissions for the agents.

Reality is, if the service becomes too cheap, commissions/margins for the agents become squeezed and operations become unattractive. It then becomes very difficult to recruit new agents and retain existing ones. Incidentally, these aren't my words but those of an industry insider.

Apparently, this is the problem that has bedevilled Airtel's money transfer service. It's cheaper tha mpesa, yes. But where are the agents?


Airtel money transfer problem has more to do with the first mover advantages enjoyed by Safaricom. I do not think it is the agents. To have agents you must have customers. Airtel does not have the numbers hence the agents are not able to sustain themselves. My take is that it has nothing to do with the how cheap or expensive the platform is.
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