Fraud, robbery biggest threats to mobile cash transfers

Fraud and armed robbery are the biggest threats facing mobile cash transfers, according to a survey of agents in Kenya, Uganda and Tanzania.

The survey of 2,000 agents by Nairobi-based Helix Institute of Digital Finance, however, did not reveal the amounts lost. “Agents are reporting serious issues with fraud and robbery. This is driving up the cost of doing business as they take preventive measures,” said the report of the survey.

The institute was founded last September by the Bill & Melinda Gates Foundation, International Finance Corporation, UN Capital Development Fund and India-based financial consulting firm MicroSave.

The researchers said expansion of the money transfer business in East Africa should be backed by improved safety.

Rapidly expanded

“Though providers have rapidly expanded business across the country, they have done very little in providing safety against theft or armed robbery,” says the survey.

Mike McCaffrey, head of digital finance at Microsave Africa, said fraud had become a critical issue because of the cost involved. More than 40 per cent of the agents said they knew someone who had experienced some theft, leading them to hire security for the business premises.

Central Bank of Kenya data shows that the number of mobile cash transfer agents have over the last three years more than doubled to 115,015 as at February this year compared the same month in 2011.

During the three years, the value transacted has also more than doubled to Sh172.8 billion from Sh76.3 billion. On average, this amounts to a value of Sh1.5 million per agent this year compared to Sh2.2 million in 2011, which shows a 47 per cent decline in revenue.

The report shows that each agent had failed to fulfill a median of three transactions per day due to lack of float.

Other challenges facing money transfer agents include the time spent teaching customers about the applications and float management.