Until 2014, all the mobile service providers in Kenya were Host Mobile Network Operators (HMNO) licensed under the Network Facilities Provider (NFP) which has rights for owning of spectrum. On 11th April, 2014 the Communications Authority of Kenya issued something interesting that had never happened before. The CAK Issued mobile virtual network operator license to three companies namely, Finserve Africa Limited, Zioncell Kenya Limited and Mobile Pay Limited.
MVNO license was one of the benefits accrued from the Unified Licensing Framework (ULF) in 2008. What this framework did, was to collapse all the technology specific licenses into three categories, namely: Network Facilities Provider, Application Service Provider and Content Service Provider with the aim to harness the technological opportunities presented by convergence. Equity bank’s full-fledged fintech subsidiary, Finserve Africa, took advantage of the opportunities presented by this new framework, by forming a mobile virtual network operator (MVNO) called Equitel. The beauty of an MVNO is that it provides all kinds of mobile telephony services to its subscribers using the facilities of an already existing mobile network operator (MNO) under the Network Facilities Provider. In the case of Equitel, they use the infrastructure of Airtel Networks Kenya.
Equitel was launched to ride on the existing and robust customer base of Equity Bank and deepen the bank’s offering to its customers. Companies generally create MVNOs to deepen their brand and relationship with their customers and benefit by offering distinctive products and services and thereby creating new revenue streams. During the launch of Equitel, Equity bank CEO Dr James Mwangi described Equitel offerings as giving their customers “Freedom and Control”. Equitel has its own [sim cards which can either be normal sim card or a thin sim. A thin sim is an overlay SIM a tiny plastic that can be put on top of a normal SIM card in a mobile device. It allows customers to use two sim cards in one phone.
Distinctive features of Equitel
Equitel is connected to an actual bank account at Equity bank and is not a virtual intermediary account like the existing mobile lending and savings partnerships between banks and telcos in Kenya. Moving funds within the equitel wallet is free. Equitel customers are able to send money directly from their mobile wallets into all existing mobile money wallets, a feat they achieved even before regulatory interventions for mobile money operability. This feature is currently available on the sim card menu. Other players in the industry use USSD for offnet mobile money transactions.
Equitel is the most multichannel mobile money product in Kenya. Customers are able to access their money from their mobile phones, from the ATMs, at Equity bank agents, through debit cards, at the bank branches, on the Eazzy mobile app and on the internet banking platform. This increases accessibility and convenience and maintains the store of value for customer’s money allowing them to be access their money, wherever, whenever, however.
Equitel customers are also able to do bank to bank transfer such as EFTs, normal RTGS and Pesalink transfers. They can as well view and monitor the portfolios of their shares traded at the Nairobi Securities exchange. The customers can easily access loans from their phones. In line with day to day needs of customers, the product has contents of various aspects topics and aspects of life such as wealth creation, education and learning and health. Equitel is truly the most liberating financial product for the masses in Kenya. Money transfer cannot be the sole measure of a country’s financial inclusion. Financial inclusion means an individual’s access to savings, loans, insurance and investments and actively using those products. It is only when a population effectively utilizes multiple channels that you can say inclusion has made an impact and Equitel does precisely that. Equitel redefined customer experience by converging banking and telecommunications services thus enabling financial inclusion.
What made Equitel an instant Success?
Equity bank has a digital banking culture that drives the Equity 3.0 strategy. The bank aspires to be an all rounded financial services company. In this regards, they built robust IT infrastructure and services to provide the foundation for rollout out of distinctive digital offerings such as Equitel. This was a big statement from the company’s board and top management.
The company also trained its staff on the requisite IT skills to support the Equitel and focus on digital banking. Equitel’s finserve attracted and recruited highly experienced and dynamic professionals to drive the product design and its adoption. The execution of Equitel by Finserve has been unrivalled in the Kenyan banking and telco sectors given the range of products and services available on the platform.
Equitel MVNO rides on Equity bank’s well executed strategy over the years that have built a significant customer base of 9 million customers in Kenya. It has strong retail presence with 283 branches, over 36,000 agents and 695 ATMs and over 20,000 point of sales machine. Coupled by strong brand and customer loyalty, these are prerequisites for niche competencies that are necessary for the success of an MVNO like Equitel.
Scorecard
Equitel has resulted in a distinctive agile and secure mobile channel that seamlessly integrates banking and other financial products and services while providing value-add telco products and services. Equitel had a market share of 4.4 per cent in mobile market subscription and 22 per cent market share in mobile commerce value of transactions as at the end of March, 2018. Equity bank’s non-funded income grew by 22% in two years running into June, 2018. Leveraging on the channels that ride on Equitel platform, Equity bank’s staff costs have reduced from 6.2b in June, 2016 to 5.2b in June, 2018. Commodisation of It infrastructure has led to reduction on staffing costs. Most of the banks transactions are now done on digital channels.
The number of Equity bank customer on Equitel stands at about 2 million. According to the theory of innovation diffusion, the product adoption is at early majority phase, meaning there is still room for growth.
Innovation diffusion theory
Digital channels are ubiquitous transforming banks from a place where a customer goes to something that they do. In essence, Equitel is a demand driven product that mirrors the day to day lives of customers. It has achieved great milestones in just 3 years after launch and great lessons can be learnt by fintechs and banks in Kenya. With Equitel, equity bank is enjoying the cumulative advantage aka the Matthew effect rising from years of building growth drivers that have compounded over time and the future is indeed very bright.
Robert Ochieng
Technology analyst