How To Create A Monopoly: The Story of MPESA.

When I was a young boy (again), Safaricom came up1 with the idea to facilitate money being transferred between people's mobile phones. They called it MPESA and piloted it within Nairobi because of business reasons that I do not know but can guess:

  1. Large population.
  2. Heterogenous population.
  3. Relatively small geographical area, leading to less research expenses and an easily controlled setup.

I do not know what was on their minds, though. I also did not see if they would be successful but my mind said maybe it can work as usual, so there was little skepticism on my part.

Those were the days when Posta still ruled the roost with their money orders whose calculations were the stuff of my nightmares in primary school. The waiting you would have to do for money would not be friendly to you in case you had an emergency, which was all too often the case. Rich people used bank transfers but even then, with banks and the way they behave as if your money is theirs, your people would still die if they were near death. Most of the rest of us did not even know bank transfers existed.

Anyway, MPESA was extremely successful and I can tell you now, Kenyans know what it means to us. In fact, if you kill MPESA, you can bring the entire nation to its knees very fast. Try and see. Just try.

What Safaricom did right implementing MPESA was including an exclusivity clause in its contracts with MPESA agents. That means no other telecommunications company would get the same reach as theirs, or access to the same customer base.

As usually happens, as the first movers, Safaricom had a huge advantage and got large market share before akina Airtel chanukad and tried to enter the same market to compete.

Now we are coming to the point.

When Airtel and the other latecomers came to the table and realised the top layer and all the meat had been taken by Safaricom, they started crying about Safaricom's 'monopoly' power, the way MPESA 'was' a banking platform2, 'anticompetitive' practices like I don't know what - in fact, these companies are just acting like those jealous neighbours who go to the mchawi to make you see a long day because you are successful. Who is this mchawi? The courts, the media, the public, Competition Authority of Kenya and anybody else who will listen.

When the mchawi method failed, they came up with another suggestion which sounds reasonable on the surface: divest MPESA from Safaricom and make it an independent entity. This is after their bids to force opening of the platform to competitors failed.

Spinning off MPESA would mean that Airtel, Telkom, Equitel and the rest would get access to the money MPESA generates for instance through dividends and returns on capital but it would also mean something else: these companies would get access to MPESA's vast network of agents, infrastructure, talent and revenue without having to put in all the work required. In essence, even if they had to pay billions of shillings, they would be buying a full loaf of bread and not wheat, sugarcanes, water, yeast, ovens, premises, staff, marketing and the rest. That makes business sense; make as much as possible from as little as you possibly can.

For us MPESA users, however, it would mean one thing: no one would offer an alternative to MPESA even if it is loaded with bullshit like Airtel, Telkom and Equity's offers. MPESA charges are high for small amounts of money, too, which is also a whole other pile of bullshit but that is also not the point here.

The point is, having Kenya's premier mobile money transfer platform divested and opened up to competition:

  1. Sets a minimum base price for all transfers on the platform, making any potential savings to the consumer meaningless and/or negligible. Why use Airtel to save a shilling when you are already using Safaricom plus will a shilling pay fare? No.
  2. Exposes me and my fellow Kenyans to the vagaries of monopoly power which include price manipulation and artificial inflation which would hurt us severely.
  3. Reduces innovation which means we will not see products like Pochi La Biashara.
  4. Makes customer service worse because the service provider will know we are not going anywhere anyway.

Airtel and the rest need to work hard.


1. This story is not about the invention or inventor of MPESA.

2. MPESA is obviously not a banking platform. A bank called CBA actually handles the financials of MPESA; Safaricom handles the technology, that is: servers, softwares, staff and stuff. Agents are volunteers.