Levelling the playing field
Competition among banks in Ethiopia has been common due to the highly regulated environment. However, despite the presence of competition, the level of competition has remained relatively constant. While competition can benefit financial technology growth, the introduction of telebirr has posed challenges to banks and non-bank mobile money operators.
The National Bank of Ethiopia (NBE) issued a Mobile money and Agent banking directive in January 2013 to reach unbanked communities. The directive enabled banks and microfinance institutions to provide mobile and agent banking services. Afterwards, mobile money services such as M Birr, Amole, Hello Cash, and Awash Wallet were launched in Ethiopia.
The Commercial Bank of Ethiopia (CBE) introduced and officially launched CBE Birr mobile money service in December 2017. Over the first four to five years, the number of consumers, agents, and merchants consistently increased, propelling the bank to the top of the industry in mobile money service.
Following the NBE’s revised directive in 2020 allowing non-financial firms to provide mobile money services, ethio telecom launched telebirr, the country’s first telecom-led mobile money service, in May 2021.
Immediately after launching, telebirr began gaining control of the mobile finance market. In a short time, telebirr’s customer base surpassed that of the banking industry players.
One likely explanation is ethio telecom’s aggressive marketing strategy aimed at capturing market share from CBE Birr and others.
Telebirr has been widely promoted via SMS, social media, accessible media, sales promotion, billboards and other means. As part of its aggressive marketing strategy, ethio telecom used various media channels for public relations and publicity. As long as the media is used objectively to inform the public, ethio telecom’s publicity efforts are acceptable.
However, some media outlets have released biased news, misinforming the public and presenting telebirr as the only mobile money service.
Some bureaus, like the Transport Bureau, issue social media announcements stating: “Vehicle fuel transactions will only use telebirr beginning April 24, 2023.” The bureau has posted this announcement daily since April 16, 2023. Ethio telecom has entered agreements with companies to use telebirr for transactions, making it the only accepted mobile money service for some transactions.
The Addis Ababa City Traffic Management Agency signed agreements with both the CBE and ethio telecom, but it is only using telebirr for transactions.
For instance, the other week, I was stopped by traffic police while I was driving. “Do you have a telebirr account?” the officer asked. I explained that I have CBE Birr instead. “If you don’t have telebirr, go to a bank and pay,” he said, deliberately ignoring my CBE Birr request. He walked away with my license, muttering “just telebirr.”
I wondered: who decided it had to be “just telebirr”? Why not CBE Birr or other providers? Isn’t it consumers who ultimately choose which service they use? This was one recent incident; I’ve noticed other instances where payments used to accept CBE Birr but now only accept telebirr.
According to the Amharic Newspaper, Reporter, Finance Minister Ahmed Shide announced preparations to switch government employees’ salaries from bank accounts to telebirr mobile money. The Minister disclosed this while presenting his institution’s nine-month performance.
This announcement from the Finance Minister suggests that the playing field is not level between CBE Birr and telebirr. Any business practice that attempts to eliminate competitors through various techniques is considered an act of unfair competition.
While CBE Birr and telebirr are owned by state companies, the central concern is identifying businesses with a competitive advantage – not ownership status.
Telebirr competes not just with CBE, but also other banks and Micro Finance Institutions providing mobile money. The competition is between two distinct industries- banking vs telecommunications- rather than within the same industry.
CBE and other mobile providers have made substantial investments with the expectation of long-term returns. It is unclear how CBE and other mobile providers will recover their investments if ethio telecom dominates the digital transaction market.
Ethiopian banks envision transitioning to digital banking, which is the global trend. This is because digitization is the future of banking. ethio telecom’s entry into the financial market warrants caution to avoid unequal regulatory obligations that could undermine banks’ competitive positions.
Given that CBE Birr and other mobile money providers can competently offer the same services as telebirr, there is no justification for giving telebirr special privileges. That makes the competition unfair.
In addition to market imbalance, special privileges could create a significant systemic risk for the industry.
To ensure fair competition, regulators must define clear rules that enable telebirr and financial institutions to compete on a level playing field. As a new entrant into the financial sector, telebirr should have to meet the same obligations as other providers.
Level playing field rules allow companies making the same product to compete fairly under similar rules affecting their costs.
In Ethiopia, ethio telecom controls the telecommunications infrastructure. To provide mobile financial services, banks must use its infrastructure. Meanwhile, ethio telecom has become banks’ largest competitor in mobile financial services.
This demonstrates the need for stringent, equitable regulation.
Temesgen Damtew holds an M.A. in Diplomacy and International Relations, an M.B.A, and a B.A. in English Literature.
Contributed by Temesgen Damtew