Mobile banking revolution gathers pace, opens new frontier for profits

Kenya has been the birthplace of a banking revolution: with 65 per cent of mobile phone users now interested in adopting mobile banking services over traditional banking, according to a global survey last month by Netherlands technology firm Fundtech and research firm Aite Group.

“Although banks have been slow to extend mobile corporate banking to their business customers, the survey findings clearly indicate that there is growing demand for this kind of service,” said Christine Barry, Research Director at Aite Group, as reported by The Asian Banker.

By contrast, since the ground-breaking launch of M-Pesa money transfer services in Kenya by Safaricom in March 2007, Kenya has moved farther and faster into mobile banking than any other nation. Out of 18 million Kenyan mobile phone users, 58 per cent are now using mobile banking services.

The services have drawn in the country’s unbanked, and enabled individuals, small businesses and corporations to send, borrow and withdraw money from and to bank accounts, pay for goods and services, and service loans and insurance payments using their mobile phones.

“M-Pesa is the first product in the world that allows the unbanked, with no banking details, no registration, no bank account, no credit card, to do banking,” said former Safaricom CEO, Michael Joseph, in his speech during the Kenya Diaspora Conference in Atlanta last year.

With mobile cash transfers now standing at an average Sh3bn a day, according to Central Bank of Kenya statistics, it is a service that has also established telecom companies as key players in the financial services sector, and delivered them a key earner, even as voice market revenue has dropped on the back of slashed tariffs.

It is additionally now opening the door to entirely new banking models. “The idea is to eventually have a financial system that would see agency banking change the brick and mortar banking concept and which will take the services even to the remotest villages,” said Governor of CBK, Prof Njuguna Ndun’gu.

As Kenya chases this new banking future, the telcom operators’ position in the market has become definitive in determining the future reach of mobile banking.

Race for position

By the end of 2009, according to the Communications Commission of Kenya, the four licensed telecoms operators — Safaricom, Zain, Orange and YU — had a combined subscriber base of 19.4 million mobile subscribers.

That amounted to a penetration rate of mobile service of 49.7 per 100 inhabitants, compared with the world average of 49.8 per 100 inhabitants reported by the International Telecoms Union 2009 World Development Index.

It is against this backdrop that the race for position in Kenya’s mobile money market, in both banking and telecoms, is now being driven by product innovation.

In May, M-Kesho, a mobile bank account, was launched in a joint initiative by Safaricom and Equity Bank. M-Kesho is fully integrated into the M-Pesa user interface on customers’ mobile phone. It is also accessible through Equity Bank’s own mobile banking service (available on JAVA or USSD).

M-Pesa is the current leading money transfer service with 12.6 million customers and 20,000 agents across the country, with 18.7 per cent of Safaricom’s total revenue coming from M-Pesa, SMS, and data.
Leading M-Kesho transactions include balance requests, withdrawals and deposits. According to statistics from Safaricom, as at July 2010, M-Kesho had registered 455,553 clients.

There had been 1,584 insurance transactions in M-Kesho’s first quarter, 123,161 balance requests, 55,749 statements requests, 74,864 deposits and 94,206 withdrawals.

Zain partnered with Citigroup and Standard Chartered Bank to deliver mobile banking across East Africa with the launch of Zap in February last year, providing a package of mobile banking features including facilities to pay bills, receive money and send to bank accounts, withdraw cash and manage bank accounts. By July 2010, ZAP had some 500,000 users.

Family Bank’s Pesa Pap, mobile-based bank account, which links up with M-Pesa, enables bulk remittance payments, the borrowing of loans, payment of bills, salary advances, financial education tips, and allows users to deposit money into their accounts, and transfer money from bank accounts to M-Pesa accounts.

The service is currently focused on capturing Equity Bank and Barclays Bank customers. Equity Bank has also partnered with Orange to launch Iko-Pesa, a mobile-to-mobile money transfer service. It allows users to pay utility bills and make purchases through mobile phones.

Iko Pesa uses similar technology to M-Pesa, Zap, and Essar Telecom’s Yu cash, but addresses their weaknesses. It has phonebook access technology that allows sending of cash to anyone in the user’s SIM card thus reducing the risk of sending cash to unintended recipients and is a joint initiative between Telkom Kenya and Equity Bank.

Apply for loans

It is a mobile service product that allows users to access and manage their bank accounts, make interbank cash transfers, pay their bills and apply for loans of up to Sh1 million.

It has also incorporated additional qualities combining mobile money transfer products and mobile banking, with Orange users able to use their present SIM cards to access the mobile money transfer service using lines that have the Equity mobile banking software.

As Kenya’s telcom operators race to innovate, mobile banking is now also spreading globally, and especially in remote and rural areas where the majority of the population is unbanked.

The M-Pesa service has been deployed by Vodacom in Tanzania and by Roshan in Afghanistan (branded M-Paisa). Vodacom has recently shadowed intentions of partnering with Nedbank to launch M-Pesa in South Africa.

Zain has meanwhile announced the expansion of Zap to Niger, Sierra Leone and Malawi. MTN, Africa’s largest operator, has now launched its mobile money service in South Africa, Uganda, Rwanda, Ghana, Côte d’Ivoire and Benin.

In Latin America, countries such as Uruguay, Paraguay, Argentina, Brazil, Venezuela, Colombia, Guatemala and recently Mexico have also initiated the service.

In Iran, banks including Parsian, Tejarat, Mellat, Saderat, Sepah, Edbi and Bankmelli now offer the service. Telenor Pakistan has also launched mobile banking with Taameer Bank, under the label “Easy Paisa”.

- African Laughter