Safaricom roils the market with phone-based savings account

Kenya’s largest telecoms operator Safaricom on Tuesday deepened its foray into the financial services market with the launch of a mobile money product that will allow users of its M-Pesa service to operate interest earning bank accounts in their cell phones.

The new service, a partnership between Safaricom and Equity Bank, frees M-Pesa from the regulatory hurdles that have capped the size of transactions in its operations and ultimately limited its use in the national payments system.

“M-Kesho is the new national payments system, a cashless distribution system that will extend the reach of financial products by offering low cost and fast access to the masses,” said James Mwangi, Equity Bank CEO.

Analysts described launch of the mobile bank account dubbed M-Kesho (Kiswahili for money for the future) as a game-changing move that not only promises to deliver savings services to millions of poor people worldwide, but also significantly boost the movement of cash in the Kenyan economy.

“This is a clear message to the world that poor people want savings accounts and mobile banking is a powerful way to deliver the services to the million people worldwide who have a cell phone, but not a bank account,” said Alexia Latortue, acting chief executive of the Consultative Group to Assist the Poor (CGAP).

M-Kesho also gives the two partners a head-start in the race to capture Kenya’s huge population of the unbanked using simple and convenient solutions.

The graduation of M-Pesa from a mobile money transfer service to a fully fledged banking product serviced through a mobile phone is being hailed as a show of Kenya’s competitiveness in the field of financial services innovation.

“There are moments in history when one can identify the tipping point. Three years ago, M-Pesa was developed and today is the day Kenya showed its leadership in the financial inclusion arena,” said Ms Latortue.

In Kenya, M-Kesho is being seen as a true reflection of the future of money and the growing convergence of the financial and telecommunications services sectors, and its impact on the use of mobile phone in the national payments system.

By facilitating access to a bank account through a mobile phone, M-Kesho will enable individuals, small businesses, corporations and, ultimately, the government, to save money in interest earning accounts, pay for goods and services as well as service loans and insurance payments using their mobile phones.

The product also marks the arrival of a low cost, low entry level savings account that could shake up the market by challenging the large number of offerings by commercial banks.

Apart from creating of the largest pool of banked individuals in Kenya, M-Kesho represents the changing face of the country’s financial sector, which has increasingly turned to new technologies to extend its reach and lower its costs.

The partnership hands Equity a foothold in the competitive banking sector and marks the end of the bank’s three year struggle to perfect a mobile banking platform.

Equity Bank first launched a mobile banking solution in 2007 aiming to develop a means through which account holders could access their finances using their mobile phones.