Users transferring money from Equity Bank’s Equitel Mobile Money platform have been hit by a more than 100% increase in the cost of transferring money from the platform to Safaricom’s M-Pesa.
M-Pesa is Kenya’s largest mobile money platform, with over 11 million users compared with Equitel’s less than 1 million.
The new charges appear to have been implemented at the start of August, just as Equitel officially announced it’s transition from a pilot phase. No official communication on the new charges was relayed to Equitel users.
Previously, Equitel to M-Pesa transfers were charged a uniform KSh. 33 per transaction. This meant that Equitel to M-Pesa transfers were cheaper than M-Pesa to M-Pesa transfers for amounts above KSh. 1,500.
Below is a select sample of amounts and the new charges, compared with the old charges.
Equitel to M-Pesa Cost
Old Equitel to M-Pesa fee
M-Pesa to M-Pesa fee
The previous flat fee charged by Equitel made sending money from Equitel to M-Pesa way cheaper for amounts above KSh. 1,500 than doing so from M-Pesa. This made Equitel a more attractive proposition, just as it looked to gain market share, especially from M-Pesa.
The new charges mean it will be cheaper for users to instead withdraw cash from their account over the ATM in batches, deposit that at an M-Pesa agent for free, then take advantage of the lower M-Pesa fees.
This presents a big blow for Equitel’s strategy, given there are more mobile money users on M-Pesa than on Equitel. It further reinforces the network effect, where mobile money users will tend to favour transactions within a platform, than between platforms.
Such a network effect rewards larger platforms - your friends are likely to be on a larger platform, hence you are likely to prefer the same - and makes smaller platforms less attractive to new users.
An enquiry to Equitel’s Customer Care says that the new fees were brought about by Safaricom’s increase in “termination fee” - the money Equitel pays Safaricom for money transacted to M-Pesa.
Equity says it's Equitel charges are capped at KSh. 27.50, and that any extra fee here is being levied by Safaricom. Below is a tweet on the same from the bank.
@denniskioko Yes, you are right. The Bank's transfer rate to a mobile wallet is capped at Sh27.50. The receiving telco levies the extra fee.— Equity Bank Kenya (@KeEquityBank) August 19, 2015
I enquired about the same from Equity Bank’s management, but I was yet to get a response by the typing of this fullstop.
Read on how Equitel works.