BUILDING MOBILE COMMUNICATION SOCIETIES IN KENYA 8 th International Conference May 16 & 17, 2013 Athens, Greece Presented By: Mr. Crisphine J. Ogongo Assistant Manager/Telecoms Licensing Communication Commission of Kenya
Contents Introduction Mobile Network Development Change of Regulatory Regime Mobile Financial Services Mobile Banking Services Challenges Priority Areas for Consideration Conclusions
INTRODUCTION CCK is the regulatory authority for the communications sector in Kenya Established in 1999 under the Kenya Communications Act,1998 (as amended); CCK is responsible for facilitating the development of the information and communications sectors (including broadcasting, multimedia, telecommunications and postal services) and electronic commerce. 3
Mobile Network Development 4
Pre-Liberalization Incumbent operated fixed and mobile networks Mobile network operated as a subsidiary of the incumbent - Kenya Post and Telecommunications Corporation (KPTC) Fixed line networks 291,000 subscribers Fixed Line waiting list 115,000 Mobile Network 20,000 Subscribers Mobile customers vetted before buying a mobile phone Cost of mobile handset Kshs 250,000 (close to $5,000 then) Airtime?? 5
28 th January 2000 1 st July 1999 Liberalization - 1999 KPTC The National Regulatory Authority The Incumbent Operator Public Postal operator The first Mobile Operator Second Mobile Operator 6
Demand for fixed telecom services at early stages of liberalization 500.000 450.000 400.000 350.000 300.000 250.000 200.000 150.000 100.000 50.000 0 1999 June 2000 June 2001 June 2002 June Jun-03 Dec-03 Feb.2004 Total Fixed LineSubscribers Demand for Fixed Services 7
Early Stages of Mobile growth 800000 700000 Operator s Target Vs Actual subscriptions Fixed Vs Mobile Subscriptions 600000 500000 400000 300000 200000 100000 0 2000 2001 2002 Μαρ-03 Ιουν-03 Δεκ-03 License Target Connected Subscribers 8
Market Evolution in Kenya Partial Liberalization era; 2000-2004 Technology Specific Licenses 2- mobile operators Full Liberalization 2004 Technology/Service Specific Licenses Process for addition mobile operators Post liberalization and Emergence of Technology Neutrality 2004-2008 Additional two operators Adoption of Unified Licensing Framework 2008 to date New innovative services and products in Mobile Networks Mobile telephone penetration grew from 20,000 subscription in 1999 to over 30.7 million subscription as at the end of December 2012. Services evolved from basis voice and SMS services to Internet, and innovative application/services 9
Drivers of mobile growth; 1. Suppressed and unmet demand got instant solution 2. Access to mobile connection instant on demand 3. No vetting 4. Cost of handset dropped to as low as 1/50 5. Mobile phone changed from status symbol to basic need
Quarterly Local SMS and Voice Traffic Voice Traffic Quarterly Traffic Volumes On-Net Traffic 6.3 billion Off-Net Traffic 1 billion Total 7.3 billion SMS Traffic SMS Traffic Volumes On-Net Off-Net Total 3.5 billion 218 million 3.7 billion 11
Impact of mobile Network Development Growth of mobile sector, post full liberalization led to; Reduction of mobile handset cost from $5,000 to as low as under $15 to date Increased accessibility to communication services Reduced cost of communication services to as low as $ 0.04 per minute Increased accessibility of services even to the rural folks According to the ITU, by the end of 2011 the global mobile cellular subscriptions reached 6 billion This represented a global penetration rate of 86.7%. For developing countries the penetration level was 78.8%. Kenya s penetration increased from 0.053% in 1999 to 77.9% as at Dec 2012
Change of Regulatory Regime and Its Impact 13
Technology Specific Regulatory Framework Before 2005 ICT Licensing was technology oriented; Fixed Service Licenses, Mobile Services licenses, Voice Services, Data Service Licenses, Internet Service licenses, etc Had limitations on the scope and type of services offered by operators
The Changing Licensing & Regulatory Framework Due to technological convergence, traditional license boundaries got blurred hence technology oriented Licensing became untenable This led to the review the ICT licensing framework in Kenya The main driving forces for change were: Technological advancements in methods of services provisioning Convergence Single network platforms Networks & Service boundaries are diminishing Changing global regulatory framework Licensing & Regulatory mechanisms being aligned with technological changes technology neutral approach 15
The New Licensing Framework Unified Licensing Framework (ULF) Content Service Provider (CSP) to provide contents services such as multimedia, data processing services and other information services Premium rate service providers Application Service Provider (ASP) To provide all forms of services to end users using the network services of a facilities provider Network Facility Provider (NFP) To build and operate any form of communications infrastructure ISP Resale Services Tier 1 Tier 2 Tier 3 International Gateway Submarine landing Widened (to near unlimited) the scope of services cellular mobile operators can provide All cellular mobile licenses were translated into the three licenses, CSP, ASP and NFP-T1 Mobile operators (GSM) allowed to construct and operate their own international gateways if they choose to do so
Key Objectives of Unified Licensing Framework To encourage flexibility in the utilisation of communications resources e.g. IPTV over GSM networks To encourage innovation in the provision of services e.g. Electronic financial services, remote tracking over GSM network etc To create a one-stop-shop for end-users i.e. One service providers Simplify licensing procedure; one licence multiple services e.g. ASP covers ISP, voice calls, GMPCS etc Reduce disputes on scope of licences 17
Impact of Unified Licensing Framework Increased demand for licenses Ease of acquisition of licenses (ASP and CSP) Increased scope of licenses with limited restrictions on possible innovative services Increased interest and participation of young technology savvy population drivers of mobile applications in Kenya Increased innovative services/application development under the CSP licenses 18
Innovative Services under the ASP and CSP licenses Mobile Financial Services transfer, banking and financial services, The biggest thing of all innovative applications over mobile networks Bulk SMS services-communications solutions for schools/institutions - Mobile backup solutions, cloud computing Vehicle tracking and fleet management Mobile content education, health, agriculture, news, holiday, directory enquiries Entertainment services -,betting, gaming, music, videos, chat, ringtones etc Marketing and Advertising Competitions and Promotions, Airtime top ups 19
Drivers for the innovative applications over mobile Networks Three aspects of mobile network development were key to innovations in the cellular mobile networks; Adoption of technology neutral licensing framework opening up opportunities for unrestricted innovative services Ubiquity and accessibility of mobile networks as a result of wide coverage Remarkable penetration rates/subscriber growth creating demand for varying services and applications that meet various needs
Mobile Financial Services 21
What is Mobile Financial Services? The provision of financial services through mobile phone networks mobile money Represents convergence of mobile telephony and financial services Has enabled services such as e-banking, sending and receiving money, obtaining credit products & services, etc over the mobile network. Supports 3 main areas: Mobile payments/transfers, Mobile finance, and Mobile banking The system has 3 Components A stored electronic value account Mobile network/device applications A network of Agents to facilitate exchange between electronic value and cash, goods or services
What is Mobile Financial Services Cont Mobile Financial Services Mobile Payment Mobile Finance Mobile Banking P2P B2B C2B Savings and/or Credit Banking Transaction Banking Information
KENYAN MOBILE OPERATOR S MOBILE FINANCIAL SERVICES was launched by Safaricom in 2007 was launched by Zain Kenya in 2009 was launched by Essar Telecom (Yu) in 2009 Mobile money transfer services started on 6 th March 2007 by the Safaricom (MPESA). It has revolutionized business/other transfers in Kenya; To date four mobile operators offer this service i.e. Safaricom M-Pesa ; Airtel- Zap/Airtel Money ; Essar - yucash and Telkom Kenya - Orange money ; Was launched by Telkom Kenya in 2010 24
Mobile Financial Services 1. Electronic funds transfers 2. Utility payments Water, Electricity 3. Point of sale services, supermarket chains, retails shops 4. Banking services, deposits, withdrawals, 5. Financial Services -loans 6. Airtime purchases Specific Services under mobile financial services Mobile Money Services Transfers Point of sale payments Airtime top ups Water bill payments Electricity bill Payments Funds transfer from electronic cash to bank account Other Services Utility bill queries and much more.. Mobile Banking Services Transfer from Bank account to electronic cash & Vice versa Access to bank accounts Bank account statements Alerts on bank transactions Agency banking ATM withdrawal
Electronic Funds Transfers: Source world bank 26
Agent X and Y Banking Hall mobile money Outlet Automatic teller Machine (ATM) integrated with mobile financial services Mobile money-agent Outlet
Water Bill queries and payments Query account balance by sending an SMS with water meter account number to a short code. Receive an SMS response with current outstanding bill. Please note that this is a premium service and costs are 10 shillings above normal rates Select Pay Bill from M-PESA menu, Enter the Water Business Number, Enter full water bill account number Follow the instructions as guided by the menu to complete transaction
Electricity Bill Payment Pay electricity bills Purchase prepaid electricity units
Point of Sale Services Retail Shops/Supermarkets
Mobile Banking Services 31
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M-KESHO A fusion of Bank and Mobile Financial services where customers can; 1. Earn interest from as little as Kshs 1. 2. Withdraw cash from their Bank Account to their M-PESA accounts and 3. Deposit through their M-PESA accounts to their M-KESHO Bank account 4. Obtain micro credit facilities (emergency credit availed through M- PESA), 5. Obtain micro insurance facilities as well as a personal accident cover that translates into a full cover after 1 year. 6. A number of banks now offer similar services
Mobile Money Transfer Statistics Dec-2012 Mobile Money Transfer Subscriptions 21 million Number of Mobile Money Transfer Agents 63,300 Total Deposits (KES) 226,762,319,504 quarterly (Approx USD 2.8 billion) 11.2 billion in transactions annually Total daily transactions over USD 31.5 million Source: CCK Annual Report 2012/13, CBK
Drivers of Mobile Financial Services Mobile Financial services have been largely facilitated by; Ubiquity of mobile network The robust penetration rates for mobile cellular services Technology neutral licensing under ULF Wide range of applications and services available on mobile services Convenience offered by mobile network services The unreachable traditional banking services 35
Challenges Faced Convergence of financial and communication services Lack of specific regulatory framework for mobile money transfer Fraud False Identification Customer lock-in
Priority Areas for Consideration Financial Inclusion Incentivizing Innovation Vs Managing Risk Exposure Quality of Service (System uptime, Capacity of Agents, Customers Service, etc) Interoperability/Seamlessness Competition Issues e.g. Club Effect Transaction Tariffs esp. international remittance Policy on Interest Income from Deposits
Conclusions Mobile Financial Services Have not only Contributed Significantly to Financial Inclusion but also Significantly improved the Quality of Lives. People can now easily do simple things such as; Send money between each other Pay Utility bills Buy goods and services Bulk cash payments e.g. salary payments International money transfer ATM withdrawals Receive dividend payment Social/Charitable collections Banking (deposits/withdrawals) THANKS TO UBIQUITOUS MOBILE NETWORKS
Conclusions There is need for Financial Regulators to craft an appropriate balance between fostering Innovation and Managing Risk There is need for Regulatory Collaboration in holistically addressing matters of Quality of Service Interoperability need to be promoted Competition Issues need to be addressed Tariffs need to come down Taxation may stifle innovations Interest on Deposits addressed
INTERESTING ONLINE NEWS ON MOBILE MONEY TRANSACTIONS IN KENYA Posted - November 30, 2012 by Robin Okuthe http://www.humanipo.com/news/2644/is-the-atms-death-due-to-mobile-money The amount of money transferred via mobile money in Kenya is close to the East African country s national budget value, new statistics from the Central Bank of Kenya (CBK) show, with some KSh1.117 trillion (US$13.5 billion) transacted. The amount - transacted between January and September this year (2012)- is close to Kenya s national budget of KShs.1.45 trillion (US$17.5 billion) in the 2012/2013 fiscal year, and also a third of Kenya s Gross Domestic Product (GDP) of KShs.3.7 trillion (US$44.6 billion). The huge cashless transaction value is attributed to the high number of consumers moving money using mobile phones, after banks and mobile services providers partnered to make these transactions as easy as possible. The combined push by banks to use mobile banking and enhanced customer service experience of money transfer services has contributed to this growth in mobile transfers, Safaricom Chief Executive Officer Bob Collymore told Business Daily Africa. For instance, Safaricom s M-Pesa mobile money service has partnered with 25 of Kenya s largest banks to provide the service, which has increased transactions and ensured that M-Pesa holds the lion s share of Kenya s mobile money sector with 61.21 percent. Integrating of bank accounts with mobile money has made it more convenient for customers to transfer money into their mobile money accounts directly, as compared to previously where customers had to manually withdraw money via ATMs before depositing into their virtual mobile accounts. It is reported the adoption of agency banking by banks in Kenya, as well as entry of other platforms like Tangaza and Mobikash, has also contributed to the increased cashless transactions. The number of agents countrywide increased to 67,301 as at September this year, compared to 46,234 last year, indicating that mobile money is penetrating even into the remote parts of the country. The increased transactions have made Kenya stamp its authority as the leading mobile money market in the world, with very few countries recording success close to Kenya s
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