Tue, Jun 02, 2009 page10

• FEATURE : ‘Mobile money’ opens doors, without banks

  • REUTERS
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  To 28-year-old Kenyan Mary Wanjiku, her cellphone is not just a cellphone. It is also a cheap, safe and easy way of sending her mother US$40.

  By using it to ping cash to friends and family, she and millions of Africans are joining Japan in breaking a technology barrier that remains in Europe and the US and paving the way to what could be the cash of the future.

  “Before, I would be forced to make the journey home to deliver the money,” Wanjiku said outside a Nairobi shop that doubles as an agent for M-PESA, the virtual cash network that means “mobile money” in Swahili, Kenya’s lingua franca.

  

  Pedestrians walk past an M-PESA shop in Nairobi on May 12. M-PESA, a virtual cash network, has attracted 6.5 million customers in Kenya in just over two years.

  PHOTO: REUTERS

  “M-PESA has revolutionized my life,” she said.

  The network, owned by Kenya’s biggest mobile phone firm, Safaricom, has its roots in Africa’s lack of infrastructure — particularly bank branches — and the enthusiasm with which people have taken to mobile phones.

  Only one in five people have bank accounts, mainly because of the prohibitive cost to the banks of operating branches in far-flung parts of a continent where many of the population of 1 billion live on a few dollars a day or less.

  But mobile phones are spreading extremely fast: to 270 million in 2007 from just 50 million in 2003, industry association GSMA said.

  Teaming up with Kenya Commercial Bank to let phone users who do not have bank accounts send each other money, M-PESA hit on a formula that has attracted 6.5 million customers, or one in six Kenyans, in just over two years.

  In Japan, which has pioneered the technology and business models toward wallet phones, about 55 million mobile phones have an e-money function, so about half of Japanese users carry them.

  The global market for mobile money is growing at 70 percent a year and should attain “mainstream” status by 2012 with more than 190 million customers, or more than three percent of mobile users, IT consultancy Gartner said in a report last month.

  Other phone companies such as South Africa’s MTN — the continent’s biggest operator — and Kuwait’s Zain are piling in with similar services in a slew of countries including South Africa and Nigeria and have pilot schemes stretching from the Middle East to Afghanistan.

  “Mobile handsets are in an excellent position to become the primary digital channel for providers of banking and related financial services in emerging markets,” Berg Insight analyst Marcus Persson said.

  In much of Europe and the US access to fast Internet connections — enabling online banking — has been a brake on mobile money, but Berg Insight expects it to catch on as wireless technologies such as Bluetooth spread.

  The scope of the African systems has grown quickly from simple cash transfers by text message to payments for everything from a taxi ride to a utility bill, and it is possible to spend a day in Nairobi without carrying any cash.

  “This is just the beginning,” Safaricom chief executive Michael Joseph said. “What you are moving towards is a person going out without cash in his pocket.”

  The cost of building and administering a network of 9,000 trustworthy agents to carry the cash that must be paid at the end of the chain means it has yet to make a profit, Joseph said.

  But beyond simple profit, Zain Africa chief executive Chris Gabriel said that the real value of mobile cash to phone firms lies in securing a long-term connection with customers as cut-throat competition in the mobile market eats into revenues.

  “We see it as a tool to create stickiness,” Gabriel said. “Yes, it’s a revenue service but at the cost of an SMS, you’re not going to get rich quickly.”

  Cellphone cash has already gone deep into Kenya.

  Companies such as tea plantation owners are finding they can pay staff via cellphone and charities can receive and distribute aid.

  Although the phenomenon is young, the World Bank in Africa has labeled it a “cornerstone for development” for its potential to mobilize remote rural economies.

  University of Edinburgh researcher Olga Morawczynski said villages were getting up to 30 percent more in remittances because of M-PESA, allowing farmers to diversify out of subsistence agriculture into small businesses such as furniture making.

  “It’s allowed money to penetrate more easily into rural areas where it’s really needed,” Morawczynski said.
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