British telecoms giant Vodafone Plc has opened up its mobile money platform M-Pesa to rival operators in a move that could see millions of subscribers in 35 countries transfer money to Kenya through a single channel.
The UK firm on Wednesday announced that it will, from next month, connect M-Pesa to a leading international remittance hub —HomeSend — giving it a direct link to more than 21 international money transfer platforms.
Connecting to HomeSend, a money transfer portal owned by BICS, allows M-Pesa users to receive money from 35 countries through their mobile phones without a charge.
Nzioka Waita, Safaricoms director of corporate affairs, said that although the final fee structure has yet to be announced, it was clear that the cost would be borne by senders of money in the Diaspora.
“This is a tripartite agreement that aggregates several mobile money transfer services through a single clearing point and enables us to link up with international money transfer partners other than Western Union,” he said.
Vodafone’s move is expected to intensify competition in the international money transfer market which has attracted new players such as the Nation Media Group with its NationHela and Barclays Bank which is also eyeing diaspora remittances.
Opening M-Pesa to other telecoms firms across the globe also takes the battle to the doorsteps of traditional money transfer service providers such as MoneyGram and Western Money Union who have been struggling to get a grip of the new market where consumers switching to mobile money transfers.
Central Bank of Kenya data shows that Kenya received remittances worth Sh50.67 billion ($596.23 million) in the six months to June, having risen from Sh34.14 billion ($406.5 million) in a similar period last year.
Vodafone, which has a 40 per cent stake in Kenya’s leading telecoms firm Safaricom, is the owner of M-Pesa – the world’s most successful mobile money transfer platform.
Safaricom, which successfully piloted and launched M-Pesa in Kenya, said details of the new deal with other operators, would be made public during the launch expected later this month.
It said the contract will initially deal with international money transfers that have been structured to leave the cost of moving money with the sending party in the diaspora.
Vodafone director of Mobile Money Michael Joseph said opening up M-Pesa to other operators is aimed at moving the mobile money platform to the next level.
He said the idea is to allow subscribers to move money across networks and across borders for a single fee charged on the sender.
“We are now at the next stage of that growth where we are breaking down national barriers to make mobile money transfer truly global and ubiquitous across all competing networks, just like text messaging today,” Mr Joseph said adding that the seamless service also allows M-Pesa to further connect the world’s unbanked population.
Mr Waita of Safaricom said the Kenyan telecoms operator was part of the agreement, which it sees as an opportunity to expand its reach. It does not however appear to include local telecoms operators.
Though it has been possible to send money across networks and national borders, the process remains complex and costs eight times more than transactions done within a single network.
In Kenya, this high transaction cost partly explains why millions of consumers have been slow to switch mobile phone service providers.
Currently, recipients of money from other networks get a short text message indicating that money has been sent to them and have to go to an agent of the operator whose platform was used to send the money for withdrawal.
Other than M-Pesa, Kenya has three other mobile money platforms: Airtel Money, yuCash and Orange Money, which have only recorded limited success in penetrating the market.
Safaricom has nearly 40,000 M-Pesa agents leaving the rest with a paltry 9,000 across the country.
Safaricom also controls 80.7 per cent market share of Kenya’s voice market, Airtel has 10.9 per cent while yuMobile and Orange have 7.7 and 0.8 per cent respectively.
Information permanent secretary Bitange Ndemo said Safaricom’s rivals have been lobbying for the establishment of a seamless network that is hinged on a single clearing house but have failed to find a solution to the challenge of growing their agent base.
“What has made M-Pesa a success story is not the software or the technical capabilities of the product but the number of agents it has across the country. People want convenience which you can only provide with an elaborate network.”
Safaricom’s chief executive officer Bob Collymore said the firm is not opposed to opening up the platform to its rivals but doubted their ability to pay for the services.
Safaricom pays Vodafone a royalty fee annually as part of an agreement reached in 2007.
Failure to meet the conditions attracts a Sh2 billion penalty.
Britain’s Vodafone has earned Sh1.6 billion or seven per cent of money transfer revenues from Safaricom in the past four years, making it the biggest beneficiary of the operator’s fastest growing business line.
In the last financial year that ended in March, for instance, Safaricom paid VSSL (previously Vodafone Group Services) Sh1.4 billion in licence fees – a massive rise from the Sh189 million paid in 2009. By the end of March this year, the cumulative worth of M-Pesa transactions stood at Sh828 billion or an average of Sh17 billion a month.
The money transfer service and revenues from other data services grew at the rate of 57.1 per cent last year to Sh24.7 billion.
Establishing partnerships with other international money transfer services puts M-Pesa in direct competition with international electronic money transfer services such as Barclays Bank of Kenya’s PINGIT, which was launched in August targetting diaspora remittance.
“With the launch of PINGIT, Barclays is now well positioned to play a key role in mobilising Diaspora remittances and facilitating bilateral trade between Kenya and the UK,” said Barclays Bank managing director Adan Mohamed during the launch of the service.
Barclays plans to make the service available for its customers in Botswana, South Africa, Zambia, Tanzania, Ghana, Nigeria, Egypt, Zimbabwe, Uganda, UAE, Seychelles and Mauritius by the end of 2012.
Nation Media Group’s NationHela allows customers to send and receive money from any corner of the world.
The funds are directly credited into the recipient’s NationHela prepaid Visa cards from which there are withdrawal or user options. Diamond Trust Bank provides the technology for the service as well as a customer care centre for card/account holders.