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Kenya trailblazes in mobile money transfer services

Monday January 2 2012

An M-Pesa user at a Jamia Mall outlet in

An M-Pesa user at a Jamia Mall outlet in Nairobi. PHOTO/ ANTHONY KAMAU 

By GRIFFINS OMWENGA [email protected]

The success of mobile money transfer by telecoms in Kenya has excited investors in Nigeria and Columbia to start rolling out similar services.

Kenya prides itself in the global pedestal as the world’s largest mobile services financial hub, with almost 18 million people using their handsets to transact.

“The big size of the un-banked population in emerging economies makes it easy to develop and roll out new innovations via phones, adding value to potential consumers,” said Telkom Kenya head of communications Angela Ng’ang’a.

According to Electronics Payment International, the number of un-banked people with mobile phones in developing countries is expected to grow to 1.7 billion by 2012.

Recent Central Bank of Kenya statistics indicate that the value of transactions done via mobile money transfer platforms stood at Sh919.22 billion as of June 2011, a 53.89 per cent increase from the same period last year.

In a year, the number of M-Pesa transactions increased from 251.25 million transactions to 364.06 million as at June 2011, compared with the previous year, representing a 44.90 per cent rise. The customer base increased by 72.40 per cent.

Currently, close to Sh2 billion is transferred daily via M-Pesa, accounting for only individual to individual transactions. The figure could double if corporate undertakings in the mobile money market platform are included.

The corporate affairs director at Safaricom, Nzioka Waita, highlighted the need for financial inclusion of the small customer as the real catalyst of developments in the money transfer industry.

The value transacted through smartcards over the same period stood at about Sh1 trillion. While this amount is higher, the rate of growth in mobile money is far higher, at 44.9 per cent, than that of smartcards at 22.06 per cent.

These advancements have encouraged other countries like South Africa and India to adopt the mobile money transfer model. Nigerian firm Paga has already started rolling out this service, hoping to register 15 million subscribers by year 2015.

All these developments are as a result of a realisation by companies offering financial products to include the low-end customer in their network. The call for financial inclusion of small income earners is slowly gaining momentum across Africa.

Just recently, a high level delegation of European and Asian executives from payment firm, Visa, made their way to Rwanda — a country with less than 100,000 card holders and no more than three banks issuing credit cards.

Almost at the same time, MasterCard — an American based firm — entered into a partnership with EcoBank to bring plastic money to millions of people in 30 African countries.

Credit card companies are realising the unexploited potential of Africa’s unbanked population and tapping into what seems to be a yawning gap for financial services.

“Our goal is the 86 per cent of Rwandese citizens who do not have access to banking services,” said Visa Africa president Elizabeth Buse.

These firms may have reached a plateau of revenue collection in the West and they realise that the emerging markets are the next cash points.

Currently, Visa collects 57 per cent of its revenue from North America. However, by 2015, they want to make more than 50 per cent of their money from the rest of the world.

“We are looking at economies in Asia such as Japan and also turning to emerging markets,” Visa’s senior executive for Singapore, Mr Rene Ho, told Smart Company.

Columbia is also in the loop, enacting legislation to facilitate electronic money transfer using Kenya as its template of implementation. Service providers are moving away from the traditional bank-led business models.

Last year has been the year of partnerships to the expand the mobile money ecosystem.