Last week, amid the usual pomp and color, Equity launched their newest baby — Equitel. Am still not quite sure how Equitel fits into the structure of Equity Holdings. I shall therefore refer to it as a product as well as a separate company. At it’s website, Equitel is proudly described as
a new revolutionary platform that helps you manage your money and communicate with more Freedom, Choice and Control.
Wow. If that’s true, then here lies quite a product. Let’s turn the lens on Equitel. Let’s examine the motivation, the purpose and aims of Equitel. Let’s ask the critical question: what value is Equitel adding to you and the market?
The conception and birth of Equitel
It’s a no-brainer that the success of Safaricom’s Mpesa provided the impetus for the launch of Equitel. Mpesa fairy tale story was just too good and disgusting for banks. That a telecom company can launch a money transfer service and be a bewildering success barely a year later was a shocking disruption. So much so that banks were in denial for months. Mpesa quickly become name of mobile money transfer. Now companies wishing to tap into the mobile money space had to go through Mpesa. Mpesa forced banks such as Equity and KCB to play second fiddle to them. Such as shame to banks that an outsider can come to their party and make it his own. Kenyans were simply smitten by the Mpesa charm. This was unacceptable to Equity.
So meetings were held. At it’s Upperhill headquarters, Equity executives scratched their heads and brainstormed all night long for months on end. When one’s security and ego is threatened, one will do anything to restore it. Heated exchanges ensured. “Will Mpesa render us to the back seat?”, they pondered and pondered. At last, when the coffee machines poured no more, a resolution was struck. An idea, one that had eluded them for so long, presented itself to them is as direct a manner as possible. “If they can do it, we can do it too”, it was decided. “This is our game folks. This is our party. Let us clone Mpesa. Let us create what the customer knows. We will call our creation the coolest name : Equitel”.
Equitel was conceived.
Laws had to be changed, for a monumental shift was happening. The market regulator Communication Authority of Kenya issued three MVNO licenses in April 2014. The think tanks at Equity Center, under the umbrella of Finserve Africa, knew they had scored their first goal in the game. Despite initial opposition from the ‘green’ company that runs MPesa, Finserve Africa pushed ahead. Instead of launching the normal boring sim-cards like other operators, these guys wanted to shake the market with the so called ‘thin-film sim-cards’. Their plot was just awesome. Equity customers were encouraged to get their spanking new sim-cards and be prepared to be amazed by it and what was coming. I got one, though not the ‘thin-film’, and waited.
And July 2015 is here with us. I am still waiting to be amazed. I am still waiting.
This is what Equitel gives, or promises to give you
- Account management : Money transfers, Eazzy Loan repayments
- Loan applications and repayments
- Telecom services : Calls, SMS, Internet
Why Equitel has got the plot up-side down
Like this Impossible cube Equitel is difficult to discern. It is not clear what it is; it plays tricks to the mind. Is Equitel an illusion?
I will tell you my thoughts exactly as they are and as a clearly as possible.
Equitel feels like a crappy copy or clone of MPesa. It is deficit of features. It is amorphous and lacks an identity. I am not trying to be too hard in Equitel. This is is just they way it is. If Equitel wants to upset MPesa, my advice to its executives is to have have a lunch date with the Airtel Money team as soon as tomorrow. They will have a wonderful and eye-opening conversation.
If all Equity wanted was to provide a convenient way for its existing customers to transact, albeit in a highly minimal manner, using their phones with new sim cards, then launching Equitel was an overkill. Think of contracting the China Road and Bridge Corporation to construct you a kiosk. It doesn’t make sense.
So it’s a safe bet to stick with the theory that Equitel was made to face rivals like MPesa head on. And from the looks of the matter, their line of action was to re-lauch MPesa as Equitel. No matter how I turn my head around that path, it leads a dead end. In other words, Equitel existing path should be avoided at all costs. I’ll illustrate further.
The market does not need yet another telecom company with a money transfer service.
We have a monopoly who like dressing in green. We also have other players, or should I call them side-players : Airtel Money, Orange Money, MobiCash e.t.c , who year in year out have to undergo the the torture of this monopoly making billions in profits as though they do not exist. All they do is curse under their breath. Ugly as it sounds, this is the reality. They do not exist.
Equitel wants to join the scramble to the bottom. It wants to fight for the crumbs falling on the feet of the giant, nibble at them just like the other players. This is very astounding. It seems the Equitel team failed to study the origins of the product they are so busy copying. Such is a classic and catastrophic mistake that all copycats make. But since I am here, I will try to quickly summarise the rise of the Safaricom-Mpesa monopoly.
Understanding the Safaricom-MPesa dominance
That MPesa is a monopoly did not just materialize from thin air like this magician pulling a rabbit out a hat.
Voilà. Ladies and gentlemen, I present to you the Rabbit out of the Hat.
MPesa is no Rabbit out of the Hat.
It’s no magic. Neither is it a miracle. This was calculated, a planned strategy that was executed just at the right time. And by design, Mpesa is bound to get better with time unless disrupted by a compelling and better product. While I don’t that new product yet, Equitel in its current form is not.
Perhaps a good explanation to the dominance of Safaricom and many of it products is given by Peter Thiel in his book “Zero to One – Notes on Startups or How to Build the Future”. Thiel makes a case for monopolies. In fact, he goes as far as concluding that “Monopoly is the condition of every successful business”. Look around you. Examine the big success and the big failures. Look at the Kenyan telecom business. Look at where the biggest profits and losses are made. I think we can trust this highly intelligent person and proceed to test Equitel through the seven question that Thiel supposes every business must answer.
- Engineering: Can you create breakthrough technology instead of incremental improvements?
- Timing: Is now the right time to start your particular business?
- Monopoly: Are you starting with a big share of a small market?
- People: Do you have the right team?
- Distribution: Do you have a way to not just create but deliver the product?
- Durability: Will your market position be defensible 10 and 20 years into the future?
- Secret: Have you identified a unique opportunity that other don’t see?
No business can get the answers to all the seven questions posed above. But it is unacceptable to fail to answer all of them. A zero out seven?
For years Safaricom fought with it’s direct competitor Kencell, later Celtel/Zain. By 2006, it was clear that it had the majority of mobile subscribers and also the biggest countrywide coverage. But most importantly, Safaricom managed to build a strong brand name for itself. That was the prize that shifted the tides of fate to its favour. With healthy and growing profits, one has a lot of time and resources to think about innovative ideas, try new products,experiment and of course to cement his market position. That is why I was not surprised that Safaricom was the first company to lauch 3G network coverage in major towns in Kenya back in 2007. Right now, only Safaricom has 4G network. You can see the pattern here, right? And, trust me, there is more to come.
Take another look at the seven questions that Thiel poses.
At the launch of Mpesa, Safaricom answered all seven with satisfactory answers. My theory is that Mpesa was inevitable. Such a kind of money transfer service was bound to happen, with or without Safaricom. The position that Safaricom held as the dominant telecom player, good financial books and a growing subscriber base shifted the odds heavily to their favour. Hence, there was no magic or miracles. Even the most dreaded aspect of the undertaking, that of building a network of agents, seemed easy. Being a trusted brand made consumers willing to sign up. It became almost ‘cool’ to have an Mpesa account. The simplicity of use and convenience thereof made Mpesa such a killer product. With time, Mpesa has become an integral part of every day financial trasactions. Take a walk through your local town. I am willing to bet you free lunch that there are at least 4 Mpesa agents within 100 m radius of where you are standing. That, my friends, is how you know you have conquered a market.
Equitel wants to challenge that.
Again, I will be clear. Equitel cannot challenge Mpesa in its current form. It will fail miserably. Even if Equitel offer completely free services, it will fail. Mpesa is expensive. Safaricom is actually more expensive across the board. But one thing trumps transaction costs. If the service offers true convenience and value, then the customers will not mind paying for it. If Equitel was launched 8 years ago, it would have been a great product.
Equitel is outdated. And the the product has no use other than satisfying the egos of its creators and financiers.
What Equitel needs to do is build a new product for 2015 and beyond. It has no other choice about that.
The road ahead
Success in anything is achieved by leveraging on strengths and exploiting opportunities seen and unseen. Nobody achieves anything worthwhile by aping competitors without a fundamental understanding of the product they are trying to copy. This is what separates market leaders from the rest.
I will give my personal take on some of the opportunities and stregths that Equity (with its Equitel) should grab.
First and foremost, Equitel should keep away from direct telecom business. This ‘thin-film sim cards’ is a gimmick that pleases only for a few minutes and is quickly forgotten. I hate sim cards. I am yet to come across a person who is excited by them. Life would be better if mobile phones would come with generic sim cards so that we do not have to think about them. The good folks at Equitel gave me yet another one. And unless Equity with its partners offer 4G Internet or very consistent 3G Internet connections, I am not buying your Internet. Remember, the cost is not the issue. Not many people consider calling as a factor when selecting a mobile network or phone. There are people who do not know if their phones have a ‘calling’ feature.
My point is that is that the smartphone era has changed the game. It’s irrelevant to associate oneself with a particular service provider. Consumers now operate on higher platform. The game is played on the Internet. Services that run on the cloud matter. They will continue to matter in the foreseeable future. Basing a product or service on USSD is taking us back 10 years ago.
The good news is that the Kenyan market is still at its infancy. For the us, the potential of the Internet platform lies in front of our tiny hands and extends to infinity. This is the space that Equitel needs to shift its focus to.
Let me give you a practical example. Many online retail stores mushrooming all over the Internet offer an option to pay goods via Mpesa/Lipa na MPesa /Paybill. These Safaricom services were not designed to be used for online transactions. They offer clumsy solutions that often result in people making stupid calls, errors and are a pain in the ass. Worst of all, merchants cannot really use track the flow of goods/services nor can consumers. Why doesn’t Equitel address this? Build a money transfer service for this era, that addresses prevailing and upcoming trends in business.
Another example. Cards suck. I mean the Visa/Mastercard cards that banks give us to shop with. How many should I own? Pulling out a card to pay for goods at a Supermarket feels remotely familiar to paying with hardcore dirty cash. I want to use my phone. I want to link my phone with my money in different bank accounts, with different people, in different investment portfolios. Then, I will whip out my phone and pay with it. If anything, my phone is the one thing I carry at all times. Why doesn’t Equitel leverage on the NFC technology to streamline this supermarket-teller-wants-a-card hassle? Phones are coming with NFC. Giant players in the US such as Apple and Google are positioning themselves in this arena because the technology is right and the consumer is ready. It is convenient. This is a once is a lifetime opportunity for you folks at Equitel.
Yet another example. Social media and instant messaging. This is it, guys. This is the real reason we love our phones more than cats, running shoes and some people. Has Equitel thought about money transfer on social media and instant messaging platforms? Mmh, no? Sooner, rather than later, people will be whatsapping each other cash. Guys will be tweeting money all over. Companies are going to make a kill out of this. People will love it. My sincere advice to Equitel is to get in this field right now. In fact, if you are a member of the team behind Equitel stop reading this. Convene a meeting as soon as possible to discus how you will tap into money transfer on social media. And act fast before it too late. This is one thing I am sure is happening, and will continue to grow. By the way, check out the video below.
What Equitel does right
There some areas that Equity with its Equitel have got absolutely spot on. Take for instance mobile based loans with very low interest rates. Though not a new thing, Mpesa backed M-Shwari does the same thing, this is could be work very well with Equity. Let us not forget that Equity’s real strength is in financial services. It’s a goddamn bank after all. By focusing on innovative financial products such as ‘phone loans’, being the to-go-to means of payments of bills and services, e.t.c, Equitel can find a proper identity.
I will continue to use my Equitel line if the need arises. I know the need won’t really come up that often because the line is just a pain to use and offers nothing new on the table. Equitel has to look ahead if wants relevance. It has to look far beyond the horizon. It has to get over this Mpesa stupor that is affecting banks and many business in Kenya.
There is life beyond Mpesa and sim cards. That life is way better than this one.