Mobile money turns Kenya into global transfers hub

As the mobile phone sector stands poised to pose its stiffest challenge yet to the financial sector in the coming months, the country’s profile as the world’s innovation hub in the mobile finances market is on the rise.

Kenya is to mobile money solutions what Silicon Valley was to software in the last decade and companies are taking advantage of that to use the country as a testing ground for solutions they hope will translate into global success.

Analysts attribute the fact that at least five international companies— ranging from financial institutions to mobile phone manufacturers and service providers — are putting the final touches to what they hope will be financial masterpieces to rival M-pesa —Safaricom’s mobile money transfer solution that shifted the balance of power in the financial world with its launch nearly three years ago.

Within that short span, the country has emerged as the seat of innovation as other players try to replicate the success of M-pesa in capturing and retaining subscribers for Safaricom, the country’s leading mobile services provider and most profitable company in East Africa.

Countries such as Kenya, the Philippines, Tanzania, Uganda and Sudan form the world’s mobile money hotspots, with states like Ethiopia and Somalia following closely behind, said Norman Frankel, the founder and CEO of Mi-Pay, a Sudanese mobile money transfer company while speaking to industry journal MMT Explained.

“If you look at the World Bank Remittance Factbook and identify countries with a low percentage of the population who emigrate but with strong urban migration trends, you’ll see these countries embracing mobile money faster,” he said.

Of these, Kenya plays host to the greatest number of mobile money products, and with over eight million users of the services, has the distinction of recruiting the highest number of subscribers to the mobile money phenomenon.

Innovation in the Kenyan mobile money scene has progressed so fast that it is a long while since March 2007 when Vodafone, the world’s leading mobile services provider which owns 40 per cent of Safaricom, picked its Kenyan subsidiary to pilot what has essentially become the preferred medium of person-to-person transfers; creating new means to settle utility bills and enlisting commercial enterprises (over 75 to date) keen to avoid the security pitfalls of handling cash and the risk of bouncing cheques.

“M-pesa has served as a testing ground for mobile money transfer systems and processes and the eyes of much of the world has been on it. The success of M-pesa has acted as a starter’s pistol for a race to gain the upper hand in mobile money transfers throughout Africa, with at least half a dozen contenders already in the wings,” said Arthur Glodstuck, an industry analyst in an interview.

The race is now on to convert the citizens of other African countries to adapt to the new mobile world order.

Standard Bank, Africa’s largest bank by assets and earnings, is said to have set up a desk to specifically draft a strategy for reaching the unbanked in the continent through mobile handsets. It is anticipated that it will utilize its Mzansi Money Transfer solution to allow customers in the 17 African countries it operates in to send and receive money without the need for a bank account. In South Africa, where the service is available, it is not just restricted to Standard Bank branches, but is available at any of the participating banks and the South African Post Office. The bank says on its website that Mzansi will be of special help to people in rural areas who can now receive money sent by relatives and friends at a bank without needing to have a bank account and it will also target migrant workers wishing to send money to their dependants back home. Its product would be a close fit to Mobile Wallet, a universal (independent of one’s bank and mobile services network) service that Kenya Commercial Bank (KCB), East Africa’s biggest retail bank hopes to roll out in the East African Community member states of Kenya, Uganda, Tanzania, Rwanda and Burundi.

According to information seen by Business Daily, although the service appears to be targeting the unbanked, its features and structure may appeal to an urban middle class target, possibly crafted with the small and medium enterprise business segment in mind.

Subscribers will be able to transfer up to Sh100,000 from virtual accounts held on their mobile phones, but notably, the money has to be cashed in one of KCB’s 200 outlets in the region

Meanwhile, mobile phone manufacturer Nokia has also announced its intention to launch a cross-network mobile money transfer product in conjunction with Obopay in the coming months.

Although the company is keeping its Kenyan launch date close to its chest, it is reportedly hunting for agents in the region, hoping to launch an assault that will place it at the forefront of regional developments that have seen the harmonisation of the East African region. Nokia will rely heavily on its affiliation to Obopay, an American mobile solutions provider to implement its service in the course of this year.