Kenya: M-Pesa Goes Global in Battle for Mobile Cash Transfer Pie


Kenyans will be able to send and receive money to UK through Safaricom's M-pesa in the company's first commercial cross-border transfer service whose details will be announced later during the week.

The move opens up the service --which has contributed to the slow decline in usage of more traditional money transfer solutions -- to the lucrative remittances market and sets the stage for a new battle on the international front between local mobile operators.

Safaricom's competitor in the market, Zain, just under a month ago, unveiled a service that allows subscribers to send or receive money anywhere in the world using the Zap platform.

Safaricom has been actively pursuing a link with its UK affiliate, Vodafone, to allow subscribers on its network to send virtual cash across borders since it launched the service over two years ago.

According to sources involved in trials for the service launched in 2008, the proposed rates for an M-pesa transaction between Kenya and Uganda are Sh480 (£4) for amounts between Sh0-18,000 and Sh720 (£6) for amounts between Sh18,120 and Sh30,000 (£151 - £250).

The rapid adoption and frequent use of M-pesa has translated to Safaricom emerging as the local market leader in mobile money transfers, mostly due to its low pricing model and the fact that it is available on the mobile phone.

M-pesa now has more than seven million users and boasts an agent network that exceeds the total number of bank branches in the country.

"By allowing money to flow electronically rather than physically, M-pesa lessens, and in some cases eliminates, many of the spatial and temporal barriers to money transfer. This releases money flows in Kenya and allows such flows to penetrate rural areas where cash is difficult to access," said Olga Morawczynski, in a CGAP research note.

Another pillar in the product's success has been the fact that users do not need a bank account to use the service, a fact that Safaricom chief executive, Michael Joseph, says has pushed the product to prominence.

The market will be keen to see if the product will have the same success in the international market, where money transfers are typically expensive and out of the reach of the unbanked population.

Analysts say the fact that international transfers is a new and untapped market, the entry of mobile providers could set the stage for price battles in the industry.

"Apart from the convenience factor, unless prices come down to comparable levels -- or at least somewhat closer to the cost of sending money domestically -- there is still a long way to go before the potential of international mobile money transfers can be realised," said Sanket Mohapatra of the World Bank.

Mobile firms have turned to borderless mobile money transfers as the next frontier in the industry's development in the last month, hoping to cash in on the lucrative remittances market.

The Central Bank of Kenya last month said remittances totalled $611 million in 2008, up from $573 million in 2007 and are set to continue rising this year.

More than half of remittances have come from North America and Europe in each of the past five years.

"Our survey shows a general downward trend in remittances flow between January and June 2009, and an upward trend in the next two months," said Charles Gitari Koori, Director Research Department of the CBK.

In August remittances inflow increased by 11.1 per cent to $55 million from $50 million in July.

Tapping into this inflow is likely to provide mobile operators with a new source of income in an attempt to diversify products as revenues from traditional activities decline in line with a more competitive environment and economic conditions.

Safaricom's latest move indicates it has surpassed yet another regulatory test.

Business Daily