In Summary
  • The book, authored by Tonny Omwansa and Nicholas Sullivan, tells of how suspicion between Equity Bank’s James Mwangi and the then Safaricom chief executive Michael Joseph delayed development of what would pass as the first mobile banking application — M-Kesho — and eventually its demise, though technically the service is still in the market. 
  • The two CEOs started their journey to stardom almost at the same time and at the same level, Joseph in telecom and Mwangi in financial service.  
  • Before M-Pesa came along, Equity Bank was experiencing a rapid growth with its base in the lower stratum of the society. But the entry of M-Pesa changed all that. By 2010, M-Pesa had 12.5 million subscribers, making about Sh2 billion deals daily.

The love-hate relationship between Kenya’s giant firms, Equity Bank and Safaricom, is ostensibly the most under-reported story of the past decade.

And this is largely because the fight between the two was fought at the boardroom level, followed by a public display of friendship. This is according to a new book Money, Real Quick: The story of M-Pesa.

The book, authored by Tonny Omwansa and Nicholas Sullivan, tells of how suspicion between Equity Bank’s James Mwangi and the then Safaricom chief executive Michael Joseph delayed development of what would pass as the first mobile banking application — M-Kesho — and eventually its demise, though technically the service is still in the market. 

That neither the two of the most “charismatic leaders with a great track record” in recent Kenya corporate history could trust the other in product development, which, looking at the current trend, was in itself half-a-decade ahead of the market, is a revelation on the tough world of corporate dealings. Each of the giants was out to guard its business empire.

“M-Kesho was hashed out through a series of one-on-one meetings between Joseph and Mwangi. You can imagine these two Goliaths of Kenyan business circling each other with caution. The design process was slow but steady; the commercial negotiations somewhat more contentious,” Omwansa and Sullivan note.

“Equity felt all transaction fees should accrue to the bank; Safaricom felt its distribution channel would bring customers to the bank. Eventually, after a series of breakfast meetings between the CEOs, they worked out a deal. Unfortunately for the customer, both Safaricom and Equity are getting transaction fees.”

The origin of the suspicion between the two is easy to decipher, if one goes to the root of how the duo built their empires to become the biggest, most profitable and most influential firms in the corporate history of Kenya.

Mr Mwangi came into Equity Bank in 1993 when it was just a struggling building society and was technically insolvent. He started to rebuild it and by 2001, the bank had roughly 100,000 customers.

Around the same time, Mr Joseph was seconded by Vodafone, which had bought 30 per cent stake at the then wholly government-owned Safaricom, as an engineer at the local mobile firm to help deploy its network.

He would later become the chief executive of Kenya’s largest mobile network by subscriber base, profitability and network.  By 2001, Safaricom had about 100,000 subscribers.
Journey to stardom

The two CEOs started their journey to stardom almost at the same time and at the same level, Joseph in telecom and Mwangi in financial service.  

In 2004, Equity Bank acquired a banking licence, ushering it to a period of supersonic growth, both in customer base and profitability.

“While most banks fought over high-end customers, Equity had developed products for the ‘common man’, promoting financial inclusion by attracting low-and mid-income account holders, and even deploying a 4WD Land Rover as a rural bank that roamed from village to village,” says Omwansa and Sullivan in the book.

By 2010, Equity Bank boasted of five million account holders, accounting for over 56 per cent of all bank accounts in Kenya, leaving the other 43 banks to share the balance of 44 per cent.

The Safaricom growth model was equally premised on the same philosophy, addressing the needs of the common man. The fight to acquire subscribers among mobile companies was won by Safaricom using per second billing while its rival, then Kencell, used per minute charging. 

A raft of other products unveiled by Safaricom, such as low denomination airtime, low-priced handsets and promotions, won the hearts of majority Kenyans.

By March 2007, when it launched M-Pesa, Safaricom had about 7.8 million subscribers, generating Sh12 billion in net income. By 30 September, 2007, M-Pesa had 635,761 active mobile customers, gaining an average of 6,774 new subscribers daily. Both companies benefited from the generosity of DFID, the British development agency, who helped seed M-Pesa but also together with FSD funded Equity’s rural outreach drive.

Before M-Pesa came along, Equity Bank was experiencing a rapid growth with its base in the lower stratum of the society. But the entry of M-Pesa changed all that. By 2010, M-Pesa had 12.5 million subscribers, making about Sh2 billion deals daily.

“Joseph had 17,500 agents to Mwangi’s 165 branches and 550 ATMS. But the two fast-growing institutions are symbiotic, for most Equity account holders use M-Pesa, and a third of M-Pesa subscribers have accounts with Equity. It was only natural that they connect, although in a complex way because they were in many ways fighting over ‘ownership’ of the same customers,” say Omwansa and Sullivan. “Needless to say, Equity saw M-Pesa as encroaching on its hard-won turf.”

However, like most of the other banks, Equity Bank would realise that the best way to contain the M-Pesa threat was to partner with Safaricom. In 2010, Equity Bank joined hands with Safaricom, allowing M-Pesa customers to access cash from Equity’s 550 ATMs.

Unlike the Family Bank deal which had come in earlier, an M-Pesa subscriber didn’t need an Equity account to withdraw money.

“On the M-Pesa menu, a user selects ‘withdraw funds’, puts in agent code 286286 (treating the ATM like a regular agent), then a Safaricom phone number, and receives a code. Input the code into an Equity ATM and out tumbles the cash. This really was the first step in putting hitherto unbanked Kenyans in direct contact with a bank,” say Omwansa and Sullivan.

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