Mobile Money-Telecom Decoupling to Bolster Interoperability, Benefit Africa’s PSPs

mobile money

As part of the ongoing separation of Airtel Africa’s mobile money business from the parent telecommunications company, Airtel Kenya’s division has become the latest to spin off its mobile money services and will now be operated under a separate legal entity.

In an interview with PYMNTS last year, Vimal Kumar Ambat, CEO of Airtel Mobile Commerce, explained the rationale behind the decision: “I imagine a business where we are not tied down to a parent telco, [where] mobile money becomes like a fabric on which the whole digital ecosystem starts to run.”

Kumar further said Airtel’s pan-African mobile money business was in transition and he saw the business evolving into a marketplace in the future. “We’ve put out the rails, now we are putting out the wagons, which are the use cases. [And] in the future anybody who wishes to integrate with us can come and roll their wagons on our rails,” he added.

Watch the interview: Central Bank Gives Nod to Mobile Money Licenses; Airtel Fast-Tracks Plans to IPO Mobile Money Unit

Disentangling mobile money operations across Africa will also allow for closer cooperation between Airtel’s different national payments businesses. As Ambat explained, the plan is for Airtel Mobile Commerce to operate as a cross-border corporation that will oversee the newly independent national mobile money operators.

This creates the possibility of greater integration between Africa’s payment networks and will help Airtel coordinate interoperability with partner payment companies from a continent-wide perspective.

Ultimately, Airtel’s vision is to empower wallet holders to be able to make a greater range of transactions, including international and eCommerce payments.

Reining in Safaricom’s Dominance

With Airtel’s mobile money branch-off gaining steam, the question of whether Africa’s other big telco-operated mobile wallets will follow looms large.

In the Kenyan context, politicians have often floated the idea of enforcing the separation of mobile money operators from telcos, usually in reference to the country’s largest mobile money service provider M-Pesa, owned by Safaricom.

In 2020, senators discussed splitting M-Pesa from Safaricom as a way to safeguard the activities of payment service providers (PSPs) and introduce more competition in the local market, where accusations of monopoly have been levied against M-Pesa.

Yet despite support for the idea in the Senate, an amendment to the Kenya Information and Communications Bill that would have broken up the country’s mobile network operators was struck down by Members of Parliament later that year.

However, the prospect of splitting M-Pesa from Safaricom never went away.

After years of speculation, the firm recently announced plans to convert into a holding company that will house the telecommunications business, the M-Pesa mobile money business and Safaricom’s Ethiopian unit as subsidiaries.

Related: Mobile Money Earns Its Stripes in Ethiopia’s Telecom Liberalization

Although a group of subsidiaries owned by a holding company is a different corporate structure to that being pursued by Airtel which will see Airtel Money Kenya operating as an autonomous business, Safaricom’s decision to restructure nonetheless represents a similar acknowledgment.

That is, Africa’s telecom firms increasingly recognize the need for mobile money services to operate within their own space with a different set of business rules and responsibilities.

Although the restructuring will have advantages for Safaricom, in comments made to Kenyan reporters, the firm’s CEO Peter Ndegwa hit back against claims that an M-Pesa spin-off would enable greater oversight.

In fact, according to Ndegwa, the combined mobile money and telecoms business never prevented the Kenyan Central Banks and Communications Authority from performing their respective regulation and oversight duties.

Watch PYMNTS interview With Safaricom CEO: ‘Innovation Mindset’ Critical to M-Pesa Success

In the end, the strategies of Kenya’s largest mobile network operators boil down to their different business models.

As Ambat told PYMNTS, Airtel’s decision to separate its mobile money unit at the Africa-wide level is the first step in a longer-term game plan to eventually list the company publicly. Until then, he said Airtel Mobile Commerce has already offloaded close to 18% of Equity to three strategic partners — Mastercard, the Qatar Investment Authority and the Rise Fund — to help fuel its growth.

Read more: Airtel Africa Gets $100M Boost From Mastercard

See also: QIA Backs Airtel Africa’s Mobile Commerce Unit With $200M

Shortly after Ambat’s interview with PYMNTS, Airtel raised a further $50 million from Chimera Capital for a stake in its mobile money business.

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