Abstract
This minor dissertation considers the competitive dynamics and regulatory issues in the mobile money services in Botswana. It focuses on the market structure and market power and the effects on competitive rivalry, innovation and pricing strategies. Successful mobile money deployment brings several socio-economic benefits in developing countries, mainly financial inclusion. However, the nature of the mobile money market which is characterised by network effects and prone to first-mover-advantage, could lead to the market tipping in favour of the large platforms, which, in turn, may result in adverse market outcomes. Promoting positive market outcomes requires balanced regulatory interventions that are geared towards encouraging the growth and evolution of the mobile money market and ensuring fair competition. This study uses a case study methodology to analyse the nature and extent of competition in mobile money in Botswana, based on data on mobile money transfer (MMT) prices and information from interviews with key stakeholders in Botswana, to achieve three main objectives.
First, the study sought to understand the mobile money market structure and factors that influence the evolution of the services from MMT to mobile financial services (MFS). It found that the market structure was a monopoly and that regulation played a key role in the successful deployment of mobile money. It also found that evolution happened slowly, mainly due to a lack of rivalry and entry by an efficient competitor. Second, it sought to understand the market power and how it influences firm strategies, including pricing. It found that Orange Money enjoyed dominance and market power which it exercised by charging high transfer prices and engaging in other anti-competitive strategies. Third, it evaluated how competition and regulatory decisions influenced market outcomes. The findings confirmed the literature that regulation is necessary to deploy mobile money successfully. In addition, it found that in markets where one platform enjoys super dominance and lacks rivalry, there is a need to push for interoperability, including issuing a directive for operationalisation, even in markets where it is mandated, to ensure competition.
The main contribution of this study to the literature is that it has identified the market structure, built a data set on prices, assessed the impact of the regulatory framework on competition and innovation, and analysed important categories of conduct.