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. They include:
- Mobile money transfer
- Airtime transfer
- Pre-paid bank card
Mobile money transfer services
The M-PESA mobile money transfer service was launched in Kenya in February 2007 in association with our joint venture, Safaricom. M-PESA enables customers to move money within Kenya by sending instructions via SMS text message to a central server. The service is 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.
Customers can deposit and withdraw cash at any of the 2,329 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.
Of the 80% of Kenyan adults without bank accounts, many are self-employed business people who 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.
Over two million customers have registered for M-PESA in Kenya since its launch, with 200,000 more signing up every month on average. The service is used by customers for a wide range of money transfer transactions, with the majority of transactions being below €20. 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. During the recent tensions in Kenya, with shops and banks closed, M-PESA was used by many to buy airtime for their friends and family.
We are trialling a wider range of payment services, including salary and bill payments, and receiving international remittances (see below). For example, Safaricom uses M-PESA to pay casual workers and also distributed 40,000 low-value cash prizes to its subscribers via M-Pesa.
We have launched a similar service, branded M-Paisa, in Afghanistan with mobile partner Roshan. M-Paisa will provide a vehicle for micro-finance institutions to distribute and collect loans and offer business services, such as salary payments to un-banked employees. We are also trialing Interactive Voice Response technology, which will enable customers who are unable to read and write to use M-Paisa services.
Vodafone has announced plans to launch M-PESA in Tanzania in partnership with our joint venture, Vodacom. We will continue rolling out mobile money transfer services in India and other African markets throughout 2008/9.
International remittances via mobile
Money sent home by migrants working abroad (foreign workers) is an increasingly 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.
In 2007/08 we trialled the use of Vodafone Money Transfer for international transfer services, as part of a pilot programme launched in partnership with Citigroup in 2006/07. The service enables people to send money abroad and collect remittances via their mobile phones. It is being trialled in Kenya – building on the success of M-PESA– with a view to expanding it to markets in Asia and Eastern Europe. Customers in the UK participating in the pilot can send money to a mobile phone in Kenya by submitting debit or credit card details and transfer amount using a secure website. The recipient will receive notification of the transaction by SMS text message and can withdraw the money that has been sent at a local mobile retail outlet.
The trial has helped us test customers’ attitudes towards the initiative and investigate practical ways to tackle complex issues associated with cross-border money transfer, including customer registration and anti-money laundering compliance. We will continue to assess different approaches for enabling international remittances. We participated in the GSM Association Mobile Money Transfer programme and shared our experience from the Kenya pilot programme. We also support the development of a sector-wide position paper on regulation about international remittances. The success of M-PESA in Kenya has led to increased recognition within the sector that domestic m-transaction services can change the way international money transfers are made. Mobile transactions can be accessed by more people and bring remittance costs down in emerging markets.
We published a CR Dialogue paper to inform and enlighten debate on this issue: Economic Empowerment through Mobile summarises three pieces of research sponsored by Vodafone. Stakeholder meetings were held in the US and London (with Forum for the Future and the World Resources Institute) to share the findings of the research and obtain feedback.
Airtime transfer services
Airtime transfer services allow pre-pay customers to transfer call-time value from their phone to that of another customer. This enables them to distribute small amounts of call-time between family, friends and contacts, and helps small businesses to have control over their phone usage. We have launched airtime transfer services in Albania, Egypt, Kenya and South Africa.
Vodafone Egypt's 'Wayak' initiative offers several options for customers who have run out of credit but need to make a call. They can obtain a one-day validity extension upon receipt of the balance from a friend or family member or transfer air-time from other pre-paid customers. Around 1.7 million Vodafone Egypt customers make a total of 20 million balance transfer transactions every month, usually between five and 50 Egyptian pounds. Customers can also send a free text message asking the recipient to call them back (see new business models).
Vodafone Cash in Egypt
We are partnering with HSBC to offer a pre-paid bank card tied to air-time balance in Egypt. The Vodafone Cash service is designed to give customers with no bank account an easy way to deposit, transfer and withdraw cash. Customers can deposit up to 1,000 Egyptian pounds (around €130) onto their card at any Vodafone Cash service outlet. They simply pay in cash, then swipe their card to top up the balance.
Cash withdrawals can be made at any Vodafone Cash outlet or HSBC ATM machine. The card is linked to the customer’s mobile phone number. Once they have registered to use the service, customers can call a dedicated number from their mobile to transfer money to another Vodafone Cash customer, pay their monthly phone bills or top up their prepay balance. Customers are notified of all transactions by SMS text alerts.
