Kenya’s second largest bank by assets, Equity bank has signed a partnership agreement with telecoms operator, Safaricom to expand their digital financial businesses.
Safaricom owns M-Pesa mobile financial services, which Equity has attempted competing with, by developing its own digital financial platforms.
Nine years ago, the two companies had teamed up to launch the world’s first mobile banking application, M-Kesho. A dispute between both parties led to its failure after which, Safaricom went on to strike deals with Equity’s rivals, CBA Group, and KCB, allowing both banks to lend to customers and take deposits via the M-Pesa platform.
Both companies had learned valuable lessons from that experience, their CEOs said.
“We were young and not very experienced. We are now more experienced and hopefully wiser”, James Mwangi, Equity Group’s chief executive, says.
Mwangi adds that Equity Bank had also realized it needed a partnership with Safaricom, whose 31 million users, dwarf Equity’s 14 million customers, 99 percent of whom are also Safaricom subscribers.
“(This is) a humble acceptance that Equity is a subset of Safaricom,” he said, adding the two might open up their distribution network to each other in the future.
Safaricom and Equity will begin by revamping the M-Kesho banking application, Safaricom’s CEO, Bob Collymore says.
“The first thing is a refresh of M-Kesho. The product still has 20,000 customers but no advertising and no marketing so that is the first thing,” he said at the news conference.
The deal will also offer Safaricom opportunities for regional expansion, since Equity has thriving banking operations in Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of the Congo (DRC).
M-Pesa is not present in most of those markets like Uganda.
Safaricom, which is 35 percent owned by South Africa’s Vodacom, controls about 62 percent of Kenya’s mobile market, with 30 million subscribers. Britain’s Vodafone has a 5 per cent stake and the Kenyan government 35 per cent.
Apart from revamping M-Kesho, both companies will explore other areas of partnership to enhance credit access for the youth and rural communities, they said, adding the scope of the partnerships will be driven by customer demand.