NAIROBI, April 29 (Reuters) - Equity Group, Kenya’s second biggest bank by assets, on Monday signed a partnership agreement with telecoms operator Safaricom to expand their digital financial businesses.
Safaricom owns M-Pesa mobile financial services and Equity has been trying to compete against it by developing its own digital financial platforms.
The two companies had already teamed up nine years ago to launch the world’s first mobile banking application, M-Kesho. But this failed when the two groups fought over commission-sharing and other issues. Both companies had learnt 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, told a joint news conference.
He said Equity Bank had also realised 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 would start by revamping the M-Kesho banking application, Safaricom’s CEO Bob Collymore said.
“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.
He said the deal would 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.
Collymore, who has helped to build Safaricom into East Africa’s most profitable company, thanks to M-Pesa, plans to step down in August for health reasons, sources have told Reuters.
The two companies did not give details on the structure of the partnership. Safaricom, which is 35 percent owned South Africa’s Vodacom, controls about 62 percent of Kenya’s mobile market, with 30 million subscribers. Britain’s Vodafone has a 5 percent stake and the Kenyan government 35 percent.
Apart from revamping M-Kesho, both companies will explore other areas of partnership to enhance credit access for young people and rural communities, they said, adding the scope of the partnerships would be driven by customer demand.
“It is not from an internal, backroom or boardroom conversation ... we will listen to Kenyans and our customers,” Mwangi said.
Reporting by Duncan Miriri. Editing by Jane Merriman