Safaricom’s M-PESA, digital banking platforms eligible to join Telebirr dominated market
Officials in charge of reforming the Ethiopian fuel market are preparing to launch a wallet application that could enable drivers to use Safaricom’s M-PESA and digital payment platforms provided by banks to pay at gas stations, in addition to Telebirr and a couple of other digital options.
Following the government’s decision to digitize all payments related to fuel, only Ethio telecom’s Telebirr, the Commercial Bank of Ethiopia’s CBE Birr, and a digital payment platform offered by the Cooperative Bank of Oromia have materialized as options for payment.
However, nearly all fuel transaction payments have been made via Telebirr, as the CBE and Coop applications have exhibited flaws, while providers such as Safaricom’s M-PESA have been requesting officials to allow them to engage in the business on equal footing with Telebirr.
The wallet application is set to offer drivers, who are obliged to make digital payments for fuel, the option to choose between the different platforms in one place.
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On May 9, 2024, Wim Vanhelleputte, CEO of Safaricom Ethiopia, aired concerns about delays on the part of the government in enrolling M-PESA in the fuel payment system.
“Our efforts to on-board the fuel payment system to M-PESA are still not resolved. We are still engaging the right authorities to get the traction and authorization to onboard M-PESA services to fuel payment in Ethiopia. For now it is very small in terms of revenue contribution,” he said.
Sahrela Abdulahi, director-general of the Petroleum and Energy Authority, told The Reporter that the fuel payment system will be opened up for all platforms that are willing to integrate into the singularized wallet application.
“We do not want each of the apps to work separately on distinct platforms. This will make it difficult for us to get seamless reporting on the fuel market. In order to sign up for the fuel payment system, application providers must be willing to work with one another. The apps must also not be too complicated for users,” said Sahrela.
The wallet app was designed and developed by the government.
“We have set out new requirements for digital financial applications to be selected for the fuel payment system. We are considering M-PESA’s request as per the new requirements,” said Sahrela.
Preparation of new legislation and directives that are expected to allow digital banking platforms to get involved in the fuel payment system has also been finalized, according to the Director-General.
“We’ve discussed the new directives and new requirements with all stakeholders. The fuel station owners association have forwarded their concerns to us and we’ve forwarded all these inputs to more senior decision makers,” said Sahrela.
The Ministry of Transport and Logistics and the national Fuel Reform Steering Committee will have the final say on the matter.
“Once these decisions are passed, the fuel payment system will be opened up to all digital payment apps that can meet the requirements,” said Sahrela.
She observes that although CBE Birr and Coop have been allowed to engage in digital fuel payments, their apps have exhibited some shortcomings.
“Our main target is not to make fuel a cashless market, but to improve the regulation of the fuel market. One of our requirements is we want flawless and timely reports from the apps. The second is we want all the apps to integrate and work on a single platform,” said Sahrela.
The wallet app is set to act similarly to how EthSwitch works for banking, as a centralized national facilitating platform for all digital payment apps in the fuel market.
However, the Ethiopian Petroleum Dealers Association, which represents the owners of fuel stations, has already submitted a letter to the Authority regarding concerns over the upcoming application.
“The new application must be flexible enough to allow fuel dealers to make instant payments, and allow them to transfer their money to any bank or account they want at any time,” reads the letter submitted by the Association.
The lobby group also listed several preconditions, such as including the Association in the payment system. Its heads worry that the government is developing the system with the sole purpose of controlling the fuel market, and not creating an efficient payment system.
The Association also aired concerns over the feasibility of frequent cash transfers from accounts in light of a liquidity crunch haunting commercial banks.
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