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Managing the Risks of Mobile Money:

Author

Listed:
  • Stefan Jansen

Abstract

Kenya is about to embark on an important reform to expand banking to millions of poor households by enabling third-party retail agents as a low-cost distribution alternative to branches. However, this initiative risks being undermined by the mobile network operator (MNO) Safaricom, which dominates the agent market. Safaricom may opt to foreclose competition to defend its entrenched position in the critical downstream mobile money transfer market. This study uses econometric market segmentation models to demonstrate the merits of the planned reform. It then describes the strategic motivation of key players in the banking and MNO markets, and uses stylized scenarios to illustrate the channels and potential impact of anti-competitive behavior. To prevent these adverse outcomes, it proposes to refine the reform design, and complement the current policy with measures that change the incentives to exercise market power.

Suggested Citation

  • Stefan Jansen, 2010. "Managing the Risks of Mobile Money:," CID Working Papers 45, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:45
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    File URL: https://www.hks.harvard.edu/sites/default/files/centers/cid/files/publications/fellow_graduate_student_working_papers/045.pdf
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    More about this item

    Keywords

    Kenya; mobile money; branchless banking; banking agent reform; scenario analysis; financial inclusion; competition policy;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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