Safaricom launches a mobile bank account product with M-Kesho in Kenya


The introduction of a seamless mobile bank account product by Equity Bank and Safaricom on Tuesday promises to open up electronic commerce -- and mobile commerce in particular -- to the mass market.

The service, dubbed M-Kesho, will allow users to perform basic banking transactions like deposits, withdrawals, loan applications, processing and reception right from their handsets.

The game-changing innovation is set to deepen the uptake of mobile banking that has been adopted to varying levels of functionality by several commercial banks, including Kenya Commercial, Family, and Standard Chartered bank.

Analysts say the introduction of fully-fledged mobile banking services will help unlock virtual settlements at retail shops that for years have grappled with poor penetration of debit and credit card usage, concerns over their security, and concerns over the time gap between payment and settlement of transactions.

"In terms of access -- for both merchants (traders) and consumers -- the mobile platform offers significant low costs and unrivalled convenience," Eric Musau, a financial analyst, said.

The Central Bank of Kenya's National Payment System survey of 2008 indicates that the number of credit cards in circulation stood at 107,000. The total number of debit, credit, and charge cards stood at 1.6 million as of the last quarter of 2008. The total monthly turnover of card-based transactions is estimated at less than Sh40 million.

In absolute numbers, mobile money services that have now roped in all economic segments of society, are a better bet at taking cashless payments to the mass market.

By March this year, M-Pesa and Zap had facilitated money transfers amounting to Sh26 billion and had a combined agent outlet of about 20,000, excluding the ATM points of banks numbering over 1,000.

Mobile money services like KCB Connect, for instance, allows users to transfer money from one KCB account to another or to any other bank account and to any mobile number irrespective of the network operator. Such services have been the ordinary man's version of a debit card.

The newly introduced M-Kesho is set to be a rudimentary credit card facility, allowing users to spend money they don't have and pay later, although the loan approval is likely to take longer than typical credit cards.

Safaricom says it has over 250 business partners who accept payments for their services through M-Pesa, up from 75 in the last quarter of 2009.

They include utility firms, insurance companies, educational, hospital, and government institutions.

Last year, both Zain and Safaricom partnered with select banks, allowing small and medium sized firms to make bulk payments to their casual employees or those working in distant locations.

Yu Cash, the third mobile money platform from Essar, is set to further boost uptake of m-commerce, as the rivalry is likely to at least keep transaction costs down or even lower them further.

In January, I&M Bank announced plans to launch an online payment portal that allows consumers to buy goods from the internet in local currency using credit and debit cards. The portal is expected to relieve recipients of online payments of the trouble and high cost of engaging offshore electronic gateways to receive money.
The offshore gateways also increase the time gap between actual payment and settlement of transactions.

Analysts say the passing into law of the draft National Payment System bill will further stimulate e-commerce as it will address settlement of transactions among the different players and technologies in the payments system, offering merchants a guarantee of settlements even in the event that a company winds up its operations.