Billions banked in cellphone wallets – the way of the future

Dorothy Achieng’s lifestyle has been changed by the mobile phone money transfer service as she now does not have to worry about not having enough money as she studies at the University of Nairobi’s main campus.

“My dad always sends me some money once he gets more,” Ms Achieng, whose home is in Migori, told the Sunday Nation this week. “I never have to queue at the bank or pay a high cost when I only need small amounts of money.”

Two years ago, her parents would send her money either through a relative travelling from Migori to Nairobi or send it through the banking system at a fee.

Now, they can send her money for her upkeep for as little as Sh30 per transaction and she can withdraw the cash between classes from a money transfer kiosk next to the university’s Jomo Kenyatta Memorial Library.

Way of life

Whether it’s students receiving money from their parents or urban dwellers sending money to their relatives in rural areas, mobile phone money transfer has become a way of life in Kenya only one and a half years after pioneers Safaricom launched the M-Pesa money transfer service and Celtel (now Zain) launched Sokotele some time after.

Statistics made available by Safaricom show that the M-Pesa service is today transferring an average of Sh150 million a day mostly in small amounts averaging Sh3,800 per transaction. So far, the system has handled over Sh36 billion.

The cellphone money transfer services are a welcome option to the millions of poor Kenyans who cannot afford to open and operate bank accounts.

Statistics show that only 19 per cent of Kenyans have access to formal financial services while savings and credit societies (Saccos) and microfinance institutions serve an additional eight per cent. Another 35 per cent depended primarily on informal financial services from such sources as shopkeepers and money lenders.

But bankers are up in arms over the revolutionary innovation. They have complained that cellphone companies are operating bank accounts outside of any regulations.

“Money transfer on the cellphone is a great idea,” John Wanyela, an executive director of the Kenya Bankers Association, told the Sunday Nation.

“But you do not allow innovation to outsmart regulation....[It] has broadened access to the unbanked, especially those in rural areas. We can’t do what they (mobile phone service providers) do. All we are asking for is a level playing ground.”

Banks have put the Central Bank of Kenya on the spot, demanding to know what laws allow telecommunication companies to offer money services, saying Zain and Safaricom are invading their domain without much regulation, while they continue to operate under the stringent rules of the Banking Act.

To this, Safaricom CEO Michael Joseph says, “What are banks complaining about? They can’t even do what we do. They can’t move Sh4,000 from one person to another for Sh30 and they don’t even want to do that kind of business. The majority of customers we are dealing with are the unbanked.”

M-Banking products

On M-Pesa, the minimum amount that can be sent is Sh100 and the maximum Sh35,000. Transaction costs on M-Pesa range from Sh30 to Sh400. Through Sokotele, the minimum that can be sent is Sh500 and the maximum Sh5,000. Transaction costs are a flat rate of Sh120.

In sharp contrast, local franchises of international money transfer firms charge anything from Sh1,700 to ShSh1,850, for up to Sh10,000, pushing the service beyond the reach of many ordinary Kenyans.

And now, mobile phone companies are planning more versatile M-Banking products, a move that is not going down well with commercial banks who see it as an unregulated invasion of their turf.