Safaricom set to disrupt financial sector yet again

Wednesday, December 11th, 2019 00:00 |
.Safaricom. Photo/File

PD Correspondent

Leading integrated communication services provider Safaricom is set to disrupt the financial sector in a major way, yet again, with plans to roll out an all-inclusive banking and investment product where subscribers can earn interest on their deposits on a daily basis.

The telco announced last week that it is currently testing a product known as Mali—Kiswahili for wealth—where subscribers would have access to a wealth management services.

The innovation, in early testing phase, has heightened anxiety in the financial and banking space with some analysts reckoning that while fintech (financial technology) is the future, financial institutions should watch the move keenly due to the significance of the brand, and the muscle at the disposal of the telco powerhouses.

Creating a buzz

“What Safaricom is offering is a banking/investment product. The rates of return they are promising are high and that is bound to create a buzz among the general populace,” said George Bodo, a finance expert.

“People must, however, realise there is a lot that goes to an investment or banking product than just returns. We still do not know for example, where Safaricom intends to invest the money and partners in the product among other things.”

Safaricom had said in a statement that Mali subscribers would earn 10 per cent interest on their deposits annually.

Safaricom’s product Mali’s proposed rate of returns is double that is offered by any bank for deposits in Kenya and the second highest such returns in the market only after a similar product housed at investment and real estate firm Cytonn which offers around 11 per cent.

According to the proposals, Mali will have an investment cap of Sh70,000 with the only requirement to enroll being a registered mobile money M-Pesa user for at least three months. Safaricom has 22.6 million active M-Pesa users.

Reginald Kadzitu, project manager with Zamara Asset Managers, said there is need for more disclosures on what Safaricom is planning to launch than is currently available in the market.

“Basically, Safaricom has now entered deposit taking. That comes with a lot of responsibilities and disclosures,” he said.

“Is this a Safaricom product or is Safaricom the conveyor belt? If so then this is unfair competition because Safaricom is riding on its brand as a telco to market an investment product,”  Kadzitu added.

Another analyst who asked not to be quoted for not being the company’s spokesperson said what should worry the financial world is that this is yet another step into the banking and financial space by Safaricom.

“Safaricom is testing waters and with each financial product they launch, they are astounded by the figures and the rate of uptake.

What will prevent Safaricom, after successfully testing and rolling out the services it is currently doing, to acquire a small bank strictly to satisfy the central bank regulatory requirements and offer all the services in-house?

Why share profits when they can do it themselves? They have the infrastructure,” said the analyst.

Mali will add to the growing list of financial products launched by the telco giant in conjunction with other financial institutions.

Through M-Pesa, Safaricom is already pushing significant numbers everyday as mobile money services provider, merchant payment services through its Lipa na M-Pesa platform and lately Fuliza, a mobile money credit card which it co-owns with NCBA and KCB Bank.

Money lending

In addition, Safaricom has money lending platform M-Shwari where the over 22 million M-Pesa subscribers can access loans and earn on savings. 

Currently M-Shwari is a top driver of Safaricom’s revenues as voice and texting services remain stagnant or even drop in growth.

Fuliza service was launched in January this year to provide M-Pesa users with top-up loans whenever they need to make a transaction, but find they lack enough money in their mobile cash wallets.

Customers are charged an access fee of 1 percent and a maintenance fee of between Sh2 and Sh30 each day the wallet remains overdrawn.

Whenever customers receive an inflow into their M-Pesa wallet after the transactions, the overdrawn position is deducted.

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