by Matina Stevis
JOHANNESBURG — Kenya’s Vodafone subsidiary, Safaricom, announced on Tuesday that it will drastically cut fees for smaller transactions on its mobile-money service, M-Pesa, as it prepares to head off competition from Equity Bank’s new rival service.
Equity’s yet-to-be-launched service boasts lower transaction fees than M-Pesa. It plans to charge a 1% fee capped at 25 Kenyan shillings—about 20 U.S. cents. M-Pesa doesn’t cap charges, and they can be more than 100 shillings on large transactions.
Equity Bank’s rollout of its mobile-money product, planned for last month, has been stopped in its tracks by a complaint by Safaricom.
The 19.3 million M-Pesa users, many of whom use the service for very small transactions, will be charged up to 67% less starting Thursday, according to a written statement by Safaricom.
The new tariffs will apply to transactions from 10 Kenyan shillings to 1,500 Kenyan shillings, which the company said make up 65% of all M-Pesa transactions.
“By lowering the cost of these transactions we will provide an increased number of Kenyans with affordable access to basic financial services,” Safaricom’s chief executive, Bob Collymore, was quoted as saying in the statement.
He added that financial services make up 20% of the telecom company’s revenue and the significant tariff reduction “is an expression of confidence in our longer term strategy to drive the growth of a cash-lite economy.”
A spokesman for Safaricom didn’t immediately respond to a request for comment on how large the profit margins for these very small transactions were and what they will be after the tariff change; or how the move will affect the company’s profitability.
Source: Wall Street Journal Blog