Price wars loom as Zain launches cheaper money transfer service

The stage is set for a bruising price war following last week’s launch of Zain’s mobile banking service, Zap.

Launched simultaneously in Nairobi, Dar-es-Salaam and Barcelona (Spain), Zap could send its competitor, Safaricom’s M-Pesa, back to the drawing board.

Customers of the new money transfer service will pay Ksh 10 per transaction, less than half what M-Pesa subscribers pay.

Zap customers can also use it to pay utility bills, such as for electricity and water, an option M-Pesa is yet to introduce.

Speaking at the services launch at Nairobi’s Hotel Intercontinental, Chris Gabriel, chief executive of Zain Africa, said the company would change lives and transform the way people do business.

“Research has shown that m-banking and m-payments can lower the transaction costs of money transfer, increase the flow of money by making it easier to send smaller amounts and introduce those without bank accounts to a means of secure financial management,” he stated.

The sentiments were echoed by Rene Meza, Zain Kenya managing director: “We believe the benefits to our customers will be immense.

This service can transform the way we handle and manage money.

The mobile phone has already improved African life in many ways — it is exciting to think it now has the potential to replace banknotes and coins and give customers access to world class banking services”.

In East Africa, Zap will be available in Kenya and Tanzania, before launching in Uganda shortly.

To establish the service, Zain partnered with regional and international banks, including Citigroup and Standard Chartered Bank.

Customers will also be able to pay for goods and services, besides sending and receiving money from family and friends, and use mobile phones to transact business in their bank accounts.

Zap will be included in the company’s One Network service, which will allow cross-border sending of airtime to other Zain customers.

Zain was the first mobile company to introduce phone-to-phone air time credit transfer, known as Me2U, in 2005.

Currently, the One Network allows customers to move across geographic borders without attracting roaming surcharges.

Following the East African launch, Zap will roll out to the rest of Africa and the Middle East.

As part of its corporate social responsibility, Zain is funding communications in several rural areas in Africa designated as Millennium Villages. Zap customers and the public can donate funds to Millennium Villages, where more than 400,000 people live.

Bashar Arafel, chief operating officer, Zain East Africa, says Zap will be a boon to Africa, as 90 per cent of the continent unbanked.

Currently, 80 per cent of Kenya’s and 95 per cent of Tanzania’s and Uganda’s populations are unbanked.

Group chief executive Saad Al Barrak said:

With a potential customer base of over 100 million people in Kenya, Tanzania and Uganda, we believe Zap will reshape the future of banking in Africa”.

Citigroup’s Global Transaction Services head in charge of sub-Saharan Africa, Sridhar Srinivasan, was equally upbeat about the service.

Kariuki Ngari, Standard Chartered Bank’s head of consumer banking, East Africa, said the bank was happy to partner with Zain.

Also present at the launch was Zain Kenya chairman Naushad Merali.

Bjorn Soderberg, a senior adviser with South Cliff, a Swedish financial consultancy, urged banks not to attack the new initiatives by telcos but to brace for competition.

He spoke to The EastAfrican ahead of the Banking and Payment Technologies Conference that opened last Tuesday in Nairobi.

He said that as more players enter the market, governments will have to put in place stricter regulatory measures to forestall cross-border money laundering and to monitor money transfers.

Zap is likely to send chills down the spine of Safaricom’s M-Pesa, but experts say current M-Pesa customers will take some convincing to migrate.

However, transaction charges are likely to drop, to the benefit of consumers.

This will depend on whether the government lowers taxes on transaction charges as well as agency fees, says Joe Divana of Maris Strategies Limited, UK.