“Oh, my dear friends,— you who are letting miserable misunderstandings run on from year to year, meaning to clear them up some day,— if you only could know and see and feel that the time is short, how it would break the spell! How you would go instantly and do the thing which you might never have another chance to do!” Phillips Brooks

Frenemy is a portmanteau of friend and enemy; and refers to a friend who may also be a competitor or an enemy pretending to be your friend. We see this relationship forming heavily across the banking and technology space with providers partnering to provide financial services to clients.

These alliances are a bit uneasy, but not entirely surprising to us.  While the various actors in these partnerships are competitors at certain levels, an eye towards stimulating growth, gaining competitive advantages and increasing market share, forces companies to work with erstwhile rivals.

Safaricom ties the knot with Equity Bank

Slightly over a month ago, Equity Group Holdings Plc made two key material announcements: First, there was the big statement of a newly formed partnership agreement with arch rival Safaricom Plc on 29 April 2019; followed a day later by the resurgence of its Pan African strategy following its intention to acquire Atlas Mara assets in four African markets.

In burying the hatchet, the two agreed to work together. They agreed to revamp M-Kesho, a product that had virtually been ignored since the two firms fell out in 2011. Safaricom also affirmed plans to buy M-Pesa IP rights from Vodafone in collaboration with its parent firm Vodacom, for USD 13.4bn; to drive the strategy to expand M-Pesa across the African continent.

Modern-day corporate handshake

Safaricom had a rather acrimonious fallout with Equity Bank, with mistrust on who “owned” the client as well as profit sharing. The M-Kesho product was abandoned and currently has 20k users, a miniscule number given the enormous customer bases of the two behemoths, who are still able to receive micro loans based on Equity Bank’s scoring metrics.

Equity Bank CEO remarked that the two “were young then and not very experienced, hopefully wiser”…but our sense is that realities of evolving competition mean that friendship and enmity in business is fluid in nature. The two notice the duplicity of their customer and are probably better off serving the customer through a single agency network infrastructure as the bulk of Equity Bank’s 13.7 million customers are Safaricom’s customer.

 Uneasy alliances forming

Two weeks ago (20 May 2019), five banks…CBA, KCB, Co-op Bank, Diamond Trust Bank and NIC Bank joined to create a loan app targeting lending to the micro and small sized businesses, dubbed Stawi. Four banks is much more precise due to the ongoing merger of CBA & NIC. This is an uneasy alliance, but it is easy to see why it may work – work together or be hang separately. The open platform appears suitable for other lenders to join in over time, with a joint risk and credit processing engine, with money wallets and tills to bank accounts. Central Bank of Kenya is an unusually strong supporter of the product – the Governor, under whose auspices the product was launched, joined the caravan to promote the product across downtown Nairobi. Curious enough though, Equity Bank wasn’t part of the bandwagon.

Could it be that Equity Bank is choosing to invest more in its newfound relationship with Safaricom? Consequently, we delve into the possible areas that the two might explore and the synergies that may arise:

 M-Kesho Revamp:

As a low hanging fruit, an M-Kesho retool seems feasible by our conjecture as the partnership seeks ways to expand lending to the MSME sector. Both firms possess a treasure trove of big data to utilize in scoring clients, derived from their m-commerce platforms (Eazzy Pay and Lipa na M-Pesa).

A copy and paste model of the existing digital lending apps tied to M-Pesa (Mshwari and KCB-M-Pesa) doesn’t seem feasible, given that Equity Bank will want to differentiate their product offering by presenting longer tenor dated facilities so as to lure more clients and in return gain market share.

Mobile Commerce Giants

Evidently, interoperability of the two platforms would dominate mobile money payments in Kenya and create synergies for regional expansion, a positive for Safaricom and Equity Bank. We however see a risk of interference from competition authorities contingent on the dominance of the resulting collaboration. 

We view the partnership between Safaricom and Equity Bank as a positive for Safaricom’s M-Pesa revenue growth and scope, fuelled by the plan to transfer the M-Pesa IP to Africa. The partnership is envisaged to yield more than the current partnerships between Safaricom and banking institutions, with both companies sharing a vision of digital innovation and expansion to new frontiers.


While we have all these changes happening in the market, we suspect local players are seeing bigger challenges that are helping catalyse these uneasy alliances. For the banking sector, a European directive designed to boost competition and the variety of products (the second Payment Services Directive (PSD2)) could be a material risk for banks which do not prepare for a future of more open platforms where customers have lower switching costs. Mobile payments may also be disrupted by players such as Facebook. There is no telling how WhatsApp powered with payments could do to M-Pesa. The age of frenemies is here, and it will be good for consumers.