Heavy investments in infrastructure – road and rail, in line with Kenya’s Vision 2030 point to the opportunity present; directly in the building of the physical and indirectly through the numerous other dependent ecosystems. Google in a partnership with Equity Bank on the Beba Pay service, Safaricom with their yet to be named in-house service – having registered over 1,300 matatus and taxi’s , VISA, Mastercard and most recently Uber – “a venture-funded startup and transportation network company based in San Francisco” have identified the lowest hanging fruit as the transit consumer and with good reason.
A mix of environmental and market issues make for a juicy proposition. Governors are busy raising parking fees, making sojourns into any city or town center more prohibitive costwise, traditional taxi ranks are being converted to more profitable parking slots and the “cabbies” relegated to the central business district peripheries, consumers are opting to live further and further away from business centers driven by cheaper housing options, the adoption of mobile money with numbers pegged at two thirds of Kenya’s adult population and most importantly the move by government , through the National Transport Authority to shift to a cashless public transport system with an ambitious July 1 2014 switch over.
There are 4 factors in my option that will determine who wins this game.
The Economic Survey 2013 values Kenya’s road passenger transport business, which is dominated by matatus, buses, motorcycles (boda bodas) and three-wheelers popularly known as tuk tuks, at Sh205 billion.This means that providers of electronic payment systems, stand to potentially earn upwards of Sh 2 billion annually assuming a transaction processing fee of 1% for payments. – Business Daily
I would personally peg it at between 2.5 and 3.5% 🙂 based on an opportunity I am currently pursuing.
The potential in the transport segment is enormous and it requires singular focus from any entity choosing to dive in. For deeper insights into why focus is important and why current linkages for emerging players makes sense, here is an interesting read – Uber Might Be More Valuable Than Facebook Someday
Singular focus bundled with autonomy will allow the market leader to build a platform that plays well with everyone creating a symbiotic ecosystem. Any innovation that then happens outside it will therefore still be beneficial and of positive impact to the bottom-line. This may mean that certain players will have to spin off their services as independent entities, but maintaining the roots that will offer competitive advantage.
We saw the impact of service differentiation in the pre and post “Michuki Rules”, where customers would pay a premium for a better service experience, which then was well mannered touts, clean vehicles, comfortable seating. On this leg, innovation on the service experience will be key and I foresee bundled offerings to suit varied client tastes and expectations plus wider fulfillment channels and not just chasing after the promise of NFC – Near Frequency Communication. We will also see service level agreements become a key differentiator.
Some numbers to chew on
Will one bill based on distance or time? What of traffic – that will need one to cover longer distances to arrive on time or cause trips to take more time than “logically” justifiable? Are service bundles that allow for a seamless consumer experience possible? My take is that we will see adaptive business models that cover different use cases and service experiences.
From the regulatory perspective, it will be essential for the Government to follow up this directive (the move to cashless public transport) with adequate legislation that will underpin what is for all intents and purposes a very significant shift in the approach to revenue collection and accountability for public transport services in Kenya – Mr Nzioka Waita,Director, Corporate Affairs Safaricom
Clearly the tech fades into the background when looked at in this light, but it forms the backbone any new service that seeks to change the face of people transport. This will be a most interesting ride.