[kictanet] [isoc_ke] The pitfalls of Innovation moving faster than Regulation - The case of Safaricom and Lipisha

[Mwendwa Kivuva]

Thank you Ali for this. My cents inline.

______________________
Mwendwa Kivuva, Nairobi, Kenya

"There are some men who lift the age they inhabit, till all men walk on
higher ground in that lifetime." - Maxwell Anderson


On 27 November 2015 at 08:56, Ali Hussein via isoc <isoc at lists.my.co.ke>
wrote:

> Listers
>
> Did we miss this unfolding precedence setting battle?
>
> In brief:-
>
> Safaricom has been sued by two mobile money service providers for
> suspending their services through alleged intimidation.
>
> Lipisha Consortium Limited and Bitpesa Limited Friday went to court over
> termination of their services on November 12.
>
> The pair offers a platform for businesses that enables them to collect,
> process and integrate payments from customers and clients using mobile
> money.
>
> Read on:-
>
> http://www.nation.co.ke/business/Mobile-money-providers-sue-Safaricom-for-service-stoppage/-/996/2965062/-/ir88je/-/index.html
>
> My questions and comments:-
>
> 1. Is Safaricom correct in shutting down a service without notice to
> protect its brand? Your guess here is as good as mine.
>
> 2. The legality or otherwise of bitcoins seems to be the main bone of
> contention here. Here's an opinion from Wikipedia on the treatment of
> bitcoins in various countries.
>
>  https://en.m.wikipedia.org/wiki/Legality_of_bitcoin_by_country
>

You cannot stop an idea who's time as come. If it's time for bitcoins to
disrupt the ecosystem, the ecosystem will get disrupted.


>
> 3. Did the CBK ask Safaricom to shut down the service or is Safaricom
> acting unilaterally because of point 1 above?
>
> 4. How do we protect the innovation ecosystem in the region from such
> happenings? This may well be a legitimate case of a startup that didn't do
> its homework regarding the regulatory framework in the space it chose to
> play in. According to Rosemary Kimwatu, a Legal Officer in the Tech Fin
> sector:-
>

Safaricom was not riding on others infrastructure when it rolled out MPESA.
On the other hand, organisations and banks that have tried to partner with
Safaricom in innovating payment solutions have got bitter deals, and even
discontinued these service. My hunch is, Equity Bank's frustrations with
Safaricom gave birth to Equitel.

The only way to protect startups is to look at our competition laws.


>
> "The main problem Bitpesa faces is that cryptocurrency operate from an
> unrecognised payment system.  The position by CBK on Bitcoins is that it's
> a currency that operates outside the purview of the normal payments system
> and can therefore not be monitored in regards to Money Laundering. A
> payment system/platform needs to work within a recognized payment system
> because then funds origination and destination can be tracked. Bitcoins
> however are not from the banking system so how will one know if someone is
> not using it to clean up illegally obtained funds?"
>
>
This sounds like a contradiction to me. When Mobile Money started taking
root in Kenya, it's success was attributed to lack of regulation which left
innovators try their luck. Regulation followed innovation. Now because
Safaricom, and MPESA is ahead, should we prevent other innovators from
growing?


> Good and solid arguments. My only problem with that argument is that
> innovation is almost *always* ahead of regulation. And Safaricom, of all
> organizations should know better than to behave like this. I fully
> understand the situation they are in and I can imagine the legal heads at
> Safaricom working overtime to 'contain' a potential mine field situation
> that can contain its core Mpesa System. I however believe that a softer
> approach could have had a better effect. My humble opinion:-
>
> Safaricom needs a better approach than the ones they take handling
> potential Frenemies. The case of Equitel is still fresh in our minds. The
> narrative is going against them and they need to manage this. The current
> scenario paints them as a Bully intent on crushing any potential threat to
> their payment platform. They are better than this.
>
> However Rosemary has a different argument:-
>
> "The whole thing is bad for innovation but the battle should be with the
> regulator not Safaricom. It would be in everyone's interest if CBK was
> forced to deal with change but this won't happen if the Bitcoin guys fight
> Safaricom. They have to deal with it in the right way by facing the
> regulator head on and proving how secure their system is in regards to Anti
> Money Laundering (AML) by showing how it has been done in other countries."
>
> Can't argue with that..
>

The community is guilty too because it has been caught flat footed . The
work of the Regulator (CBK), is to regulate :-) and the work of the entire
community is to develop proper policies to govern them.

But the regulator can give a high level definition of the problem, and the
path we should consider taking.
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