For a while now, M-Pesa agents who signed up as agents for various banks under the agency banking model have been under pressure to choose one or the other. Initially, many thought it was a bluff from Safaricom which would go away. Shock on them! Their business lines and tills are actually getting confiscated.

At the heart of the tugging are three issues: brand visibility, revenue losses and agent loyalty.

Safaricom have very strict standards for branding of the M-Pesa outlets. Their logo and colors have to be the most prominent feature that strikes a customer at a glance. Largely this has been achieved. When walking down the streets, one can easily pick out shops associated with Safaricom be they airtime resellers or M-Pesa agents.

What did Banks do when the rolled out agency Banking?

They targeted these outlets to double up as their agents. It worked out nicely to begin with because the concept was easier to sell to people already involved in provision of financial services.

Problem number one arose when banks began branding these outlets. They also required that their logo and colors dominate the most visible part of the outlet. Where Safaricom had branded, they simply peeled off that coat and painted their own colors. Safaricom was not going to take this lying down.

To illustrate the second problem on loss of revenue, I will use an example.

Picture a parent living in Kapsabet and has a student studying at a college in Nairobi. This parent regularly sends money for fees and upkeep. Let’s assume he sends kes 30,000 at the beginning of the term and kes 5,000 monthly for upkeep. To send this money via M-Pesa, the cost breakdown is as follows: kes 30 to send the initial kes 30,000 and a withdrawal commission of kes 170. The subsequent transfers of kes 5,000 per month will cost kes 90 to transfer and withdraw. Over a three months term, this parent incurs costs of kes 380 sending money to the child.

Suppose this agent doubles up as a bank agent and earns commission on accounts opened. He will sell an account to the student on the basis that it will cost much less to receive the money sent by the parent. The student proceeds to open an account, gets an ATM card and spends kes 30 only to withdraw money deposited directly to his account by the parent. This way, the agent earns their commission while retaining the customer.

M-Pesa loses out.

There is also the issue of loyalty by the agent. Acting for Safaricom alone, the agent will dedicate their undivided attention to growing the brand and its market share. They will also push to increase transactions and earn more revenue for mutual benefit. When they double up as bank agents, their effort will be divided between growing the two brands and their market share. The agency banking business partially grows by cannibalizing the M-Pesa market share.

From the above, it is clear that to some extent, the agent banking model is a substitute for M-Pesa service hence their uneasy relationship.