Kenya's mobile money industry could undergo a serious shakeup thanks to new technology. A Kenyan bank is rolling out its own mobile network using a new paper-thin SIM card that sits on top of an ordinary SIM. But industry leader Safaricom says thin SIMs could lead to data theft and fraud.
For years mobile money, perhaps Kenya’s most successful invention, has been transforming the way Africans do business and send money home. The service was launched by Kenyan mobile operator Safaricom, and in Kenya, Safaricom’s M-Pesa enjoys a near-monopoly when it comes to transferring money via mobile phones.
But now the company could be facing its first serious challenge, in the form of a new technology that threatens to upend the mobile money sector.
Equity Bank CEO James Mwangi told Kenyan lawmakers the new SIM cards his company is launching are all about making mobile money more accessible to the masses.
“It is all about security, it is all about affordability, it is all about accessibility that has made us to make this choice ... We want to do exactly what we did in banking: leveling the playing field,” said Mwangi.
Equity's competing product
What Equity will soon be offering are “thin SIM” cards, chips embedded in sheets of plastic that lie on top of a standard SIM card, making two networks available simultaneously without forcing a customer to choose. Through its newly-launched telecom network, Equity says it will offer mobile money at slashed rates: one sixteenth of what Safaricom charges.
But Safaricom has been battling the thin SIM rollout through the courts and regulators, claiming the technology is unsafe. Using two cards at once could lead to stolen PIN numbers and mobile money fraud, Safaricom’s Steven Chege told a parliamentary committee in September.
“We are saying that that step of transferring money from the bank to your mobile wallet is visible to the thin SIM. The PINs that you put in are visible to the thin SIM," said Chege. "And for that reason it adds a new layer of uncertainty, a new layer of possibility for fraud, a new layer of possibility for interception by third parties who may have malevolent desires to access your money.”
Nevertheless, thin SIMs have been approved in Kenya for a one-year trial.
Banks like Equity can move money easily and cheaply, points out Danson Njue, telecoms analyst for the research firm Ovum. If successful, they could eventually come to dominate the mobile money market, he said.
“We are looking at banks obtaining licenses for telecommunication services. And we know that mobile operators don’t have licenses for banking. So I think from that you can clearly see who the winners will be,” said Njue.
As a new technology, mobile money remains fairly unregulated, he said. If the regulators decide to step in, however, mobile operators could find themselves in a tight corner.
“If a regulation comes that restricts them from introducing certain services that look more like a bank, then we will have banks with telco services actually being left to rule the market,” said Njue.
With stakes this high, Njue added, plenty of African companies will be watching carefully to see how the thin SIM works in Kenya.
“If this technology is successful, then we will be seeing a lot of other players adopting this kind of technology. It is a very important development, because its success or failure in this case is going to determine so many things,” said Njue.
Thin SIMs are expected to become available in Kenya soon. In the meantime, Safaricom says its concerns still stand, and the company is reviewing its legal obligations to its customers.