Reports that MTN and Standard Bank could be forced to pay up to $136 million for a patent infringement could prove beneficial for M-Pesa as it seeks to enter the lucrative South African market, it has emerged.
Legal action against mobile company MTN and Standard Bank could mean their mobile money transfer service could be pending a legal decision, offering a window of opportunity for M-Pesa as it seeks entry into that market.
In the legal suit filed last week, 3MFuture Africa claims the two companies who recently launched their mobile money transfer venture infringed patent laws.
The company claims it was involved in creating a system for Standard Bank in 2001, during which it introduced the technology, but which was only registered as a patent in 2003.
3MFuture Africa is asking that the service be stopped pending a judgement.
As Vodafone prepares to enter the South African market using the M-Pesa platform that has over 9 million users in Kenya, the action could see the firm benefit if its competitor’s service is put on hold.
Like M-Pesa, MTN’s mobile facility allows people to transfer money using the mobile phone even if they do not hold a bank account, and is largely seen as facilitating access to financial services for low income earners.
Vodafone announced its intention to launch M-PESA in South Africa through its subsidiary, Vodacom South Africa, using Nedbank as its banking partner in February.
The global telecommunications giant, which runs the M-Pesa service in Kenya through its associate Safaricom, is targeting approximately 26 million people in South Africa who do not hold official bank accounts.
Kenya is largely seen as a success story in the budding mobile money transfers market, being home to several products that leverage the mobile phone to extend financial services to subscribers.
Since M-PESA’s launch, it has facilitated the movement of over Sh401 billion in person-to-person transfers as of the end of March 2010.
Apart from Kenya, Vodafone has deployed the service with Vodacom in Tanzania and Roshan in Afghanistan, where the product is known as M-Paisa.
In total, the service has over 11 million registered customers, who use the service to transfer money, airtime top-ups and bill payments.
In Kenya, the M-Pesa has been extended beyond borders and now allows subscribers in the UK to send money to Kenya using the service.
“The successful take-up of M-PESA in Kenya has clearly demonstrated the demand for easily accessible, secure payment services particularly in emerging markets,” said Cenk Serdar, Director of Mobile Payments at Vodafone Group.
“There are many benefits of using mobile phones for micro-transactions in a country like South Africa, where only 60 per cent of people have a bank account in the formal sector, and yet the mobile penetration rate amongst the total adult population is more than 94 per cent,” said Mr Serdar.
Research shows that financial services are critical for economic development and inclusive financial services for the unbanked are essential for poverty reduction.
Lack of access
Lack of access to banking services is forcing many to rely on a cash-based economy with little security.
Mobile technology can assist in enabling millions to take part and benefit from a more formal economy which will in turn drive economic development.
Meanwhile, a major technical hitch last week saw several M-Pesa subscribers face delays in transactions.
Safaricom attributed the outage to maintenance issues.