M-transactions
Banking facilities are often scarce in emerging markets, particularly in rural areas. Many people who do not have bank accounts find it difficult or expensive to transfer money through traditional banking services.
The rapid growth in access to mobile telecommunications in emerging markets has created new opportunities to provide secure, low-cost financial services using mobile networks. We refer to these as m-transactions.
Mobile money transfer services
We have launched mobile money transfer services in Kenya, Afghanistan and Tanzania, enabling customers to move money by sending instructions via SMS text message to a central server. These services are aimed at mobile customers who do not have a bank account, often because bank facilities are prohibitively expensive or customers live in areas where access to financial services is limited.
The M-PESA mobile money transfer service is now well established in Kenya, where it was first launched in February 2007 in association with our associate undertaking, Safaricom. Customers can deposit and withdraw cash at local M-PESA agents across Kenya, including retail outlets such as airtime dealers, petrol stations, and supermarkets. They can transfer money to other mobile users via SMS and buy pre-paid airtime credit. Customers wanting to use the service do not need a bank account, but must register with an agent to meet our ‘Know Your Customer’ requirements.
The service is used by customers for a wide range of money transfer transactions. For example, many self-employed business people in Kenya without bank accounts need to be able to transfer money. People with bank accounts can also use the service to send money to their families living elsewhere in the country who do not have bank accounts, avoiding more expensive and insecure local money transfer services.
Consumers use M-PESA as a secure method for storing their money when they travel on public transport, as well as to pay school fees. Small traders such as grocers and taxi drivers are also beginning to accept M-PESA as an alternative method of payment. We are expanding the scope of the service in Kenya to:
- Make salary payments and microfinance loan repayments
- Pay school fees and utility bills
- Deliver humanitarian aid (through a trial with Concern Worldwide)
- Provide international money transfers
The success of M-PESA in Kenya has been recognised by several awards, including the prestigious World Business and Development Award from the United Nations Development Program, the International Chamber of Commerce and the International Business Leaders Forum. See more about recognition and stakeholder feedback on the M-PESA service in Kenya.
In Afghanistan, where the service is branded M-Paisa, we have also introduced an interactive, voice-recognition service to allow customers who are unable to read and write to use M-Paisa.
Establishing a secure model
Mobile money transfer is a new business area for regulators and we are committed to working with them to establish an efficient and secure business model to facilitate the launch of services like M-PESA in new markets. An audit of M-PESA by the Kenyan Ministry of Finance confirmed that the service in Kenya provides the necessary security measures to prevent money laundering and protect consumers, as well as addressing other potential risks.
International remittances via mobile
Money sent home by migrants working abroad (foreign workers) is a significant source of income in many developing countries. But transferring funds internationally can be complicated and expensive, particularly in relation to the small amounts sent in each transaction. It can also be difficult for recipients to collect the money if they do not have a bank account or access to financial services.
Together with Safaricom, we are trialling a cross-border mobile
money transfer service between the UK and Kenya in association with Western Union. The trial extends the M-PESA service in Kenya to make international payments, following our previous pilot of a similar service with Citibank. Customers in the UK can transfer money for a much smaller fee than conventional bank transfers, and recipients in Kenya can withdraw the cash at any M-PESA agent or forward it to another mobile phone in Kenya.
Partnering with Western Union gives the programme access to the money transfer company’s global network of agents and trusted processing centre for international remittances. This provides an established mechanism to obtain proof of identity from customers to meet strict regulations on international money transfers.
