Mobile money transfers edge out rival operators

Traditional money transfer service operators are losing their grip on the market as more Kenyans turn to mobile phone-based platforms that offer instant movement of cash, enhanced security and low transaction costs.

Official data on cash movement in the economy shows that nearly half (47 per cent) of all money transfers in Kenya are taking place through the mobile phone – a significant leap in use since the first such platform, M-pesa, was launched in the country two years ago.

Financial Sector Deepening (FSD), a research firm that conducted the survey for the Central Bank of Kenya, found that this rapid growth in mobile phone money transfers is piling pressure on formal and informal money transfer platforms that dominated the multi-billion shilling industry before the advent of the phone-based system pulling down their market share and revenues.

Popularity of the mobile money transfers is mainly hinged on the low cost of transaction, safety and speed – which delivers near instant transfers.

Nine out of every 10 users of mobile cash transfer services say they are mainly attracted by convenience, high (almost instantaneous) speeds, safety and relatively lower transaction costs, according to FSD.

M-pesa, which rides on telecommunications services provider Safaricom’s network has about seven million registered users who have moved an estimated Sh130 billion since the service was launched in March 2007.

Zain, the only other telecoms operator with a money transfer platform, has 350,000 customers and has transacted Sh1 billion since February’s launch of its Zap service.

Postal Corporation of Kenya’s (PCK) money order service appears to have taken the biggest knock with the latest shift. The service that held 21 per cent of the money transfer market before the advent of mobile phone-based money transfers in March 2007 now has near zero usage.

“Usage of money orders has virtually stopped,” said Caroline Pulver, a project manager at FSD.

Efforts to get comments from the PCK - which did not have a substantive chief executive until last week’s appointment of former police commissioner Hussein Ali to the post - were unsuccessful.

Other money transfer platforms, including MoneyGram, PostaPay and Western Union have lost market share and now control only three per cent of total transfers, from close to a tenth of the total transfers two years ago.

Only one person out of every 10 now sends money by courier or public transport bus companies – a platform that controlled a quarter of all transfers before the launch of mobile phone-based platforms.

Cash transfers by hand have, however, withstood the mobile technology tide, with data showing that about a third (28 per cent) of Kenyans still sends money through friends and relatives.

Dwindling fortunes of money transfer companies is reflected in the sharp decline of PostaPay’s revenues in the last three years.

Launched in 2006 by the Postal Corporation of Kenya, PostaPay grew steadily in the first nine months to record a pre-tax profit of Sh48.4 million from gross commissions of Sh143.9 million earned from local money transfer business.