- Barring last-minute hiccups, Safaricom will launch interoperability — the ability of different computer systems to communicate and exchange data — of the two rival networks for merchant payments on Friday.
- The new system will remove the hurdle where Airtel subscribers, for example, cannot pay for goods and services through Safaricom’s checkout and payment numbers.
- Business owners are charged a maximum of 0.5% or no more than Sh200 per transaction for money collected from the till, Safaricom says on its websites.
Airtel subscribers will start paying for goods and services this week via Safaricom’s #ticker:SCOM Lipa na M-Pesa, enabling seamless money transfer through merchants attached to different carriers.
Barring last-minute hiccups, Safaricom will launch interoperability — the ability of different computer systems to communicate and exchange data — of the two rival networks for merchant payments on Friday.
The new system will remove the hurdle where Airtel subscribers, for example, cannot pay for goods and services through Safaricom’s checkout and payment numbers.
Regulators led by the Central Bank of Kenya (CBK) have pushed for a transparent transfer to curb the dominance of mobile money service Safaricom and Lipa na M-Pesa, which processed payments worth 970 .2 billion shillings in the year to January.
“Lipa na M-Pesa will (will) have interoperability between operators. This will benefit both consumers and operators,” said a senior Safaricom executive who did not wish to be identified ahead of the official launch.
Airtel’s version of merchant payment services is dubbed Lipa na Airtel Money, but it’s much less used compared to Safaricom’s, a market position that matches its stake in the mobile money transfer service.
We failed to get a comment from Airtel before going to press.
Pricing details were not available.
Business owners are charged a maximum of 0.5% or no more than Sh200 per transaction for money collected from the till, Safaricom says on its websites.
There are no customer fees for payments made using the Lipa na M-Pesa Buy Goods segment, except for payments made at gas stations.
The CBK said the increased use of mobile money among agents and merchants through platforms like Lipa na M-Pesa has been limited by the lack of interconnection between telecom operators.
“This trend is expected to continue to increase once initiatives such as interoperability are fully rolled out, allowing customers to transact seamlessly across the ecosystem regardless of their provider,” CBK said.
The value of mobile money transactions through agents as a percentage of gross domestic product (GDP) has risen from 23% in 2010 to 60% in 2021, according to the banking regulator.
There were over 2.2 billion transactions worth over 6.9 trillion shillings in 2021.
Through interoperability, the CBK is working to replicate the link between Airtel Money and M-Pesa that was introduced four years ago.
Users can send money over mobile networks, which means money can be sent from M-Pesa and reflected in an Airtel Money wallet.
More than 30 million people in Kenya use M-Pesa, which also allows users to send money and make payments over the phone, save and borrow.
Safaricom had 258,000 mobile money agents at the end of September, leaving rivals in control of the remaining 31,255 outlets.
This dominance is played out in the merchant payment segment.
Safaricom’s Lipa na M-Pesa merchants grew 72.8% to 387,000 during the reporting period, underscoring the impact of increased preference for cashless transactions.
Safaricom’s checkout and bill payment service grew to take an 85.8% market share of non-cash payment for ordinary goods and services, underscoring the entrenchment of the money platform mobile in everyday transactions.
“Competition for merchant acceptance in the mobile money space is limited. This is also due to limited acceptance of competing payment instruments,” the CBK said.
“Limited interoperability in the mobile money merchant acceptance space also limits the payment options available to customers.”
Lipa na M-Pesa was launched in June 2013 and has aggressively recruited merchants across the country, including large and small businesses such as gas stations, supermarkets, convenience stores and restaurants.
This has seen it overtake card payments – run by banks and their global payment technology partners such as Visa and Mastercard – which have largely focused on formal retailers.
Merchants registered with Lipa na M-Pesa must pay a fee of up to 0.5% of the transaction value and customers may also incur the same level of fees for using the service.
Banks, meanwhile, can charge merchants up to 2% to process card-settled transactions, which are free for shoppers.
For merchants, the use of cashless payments has the advantage of reducing lost revenue in addition to eliminating the risks and costs of processing banknotes and coins. Cashless payments are expected to increase in the coming years, in part due to increased digitization and lower fees by payment service providers.
Kenya, however, still relies heavily on cash with which over 90% of transactions are settled.