Mobile Banking - A new product is launched in Kenya

Kenya's largest mobile operator, Safaricom, and Equity Bank, have unveiled M-Kesho, a mobile banking product targeting rural areas. M-Kesho will allow M-Pesa (Safaricom's mobile money transfer service) account holders to deposit money, withdraw cash and access loans.

"If all M-Pesa customers are banked as is envisaged with the M-Kesho product, Kenya will be the most banked country in Africa and in the developing world," said Mr. James Mwangi, Equity Bank chief executive.

The product will transform M-Pesa accounts into bank accounts, enabling M-Pesa customers to open savings accounts where they will be able to transfer as little as a Ksh.100 (US$1.3) at no cost.

Speaking during the launch in Nairobi, Kenya’s President Mwai Kibaki said M-Kesho is a landmark product that will integrate the telecommunications and banking sectors and would improve access to cost effective financial services.

Other than deposits and withdrawals, M-Kesho customers will also be able to access micro-credit and micro-insurance products, and earn interest on their money.

Remittances - Money transfer firms target mobile services

The shifting fortunes in the money transfer market are pushing traditional agents such as Western Union and MoneyGram to develop mobile solutions, which they are relying on to recapture a share of the local market.

Hit by declining market share following the advent of mobile money services, the two operators have had to change strategy as they move to defend their core business.

“If it’s a remittance transaction, we want to touch it, whether online, by phone or at one of our global agent locations. There will be more opportunities ahead for mobile transfers and more transfers direct to cards,” said Thomas Christophersen, MoneyGram’s head of new product and channel development.

According to data from Financial Service Deepening (FSD), traditional money transfer operators have lost significant market share since the advent of mobile money services such as M-Pesa and Zap.

Their market share in Kenya has fallen to just three per cent of the total transfer market, down from a tenth of the total transfers market in 2007.

FSD says that the proportion of people using the service stood at 17 per cent before mobile money transfer commenced, a figure that has dropped as the telecommunications firms continue to eat into a larger share of the money transfer market.

In 2009 MoneyGram moved to double its agent locations in Kenya while Western Union implemented a lower tariff structure as they both attempted to fend off rising competition from mobile operators by adding PostBank’s branches to its agent network.

Many users cite the high cost of transferring money using operators such as MoneyGram and Western Union as a barrier to access, preferring the lower rates offered by mobile service providers.

World Bank estimates indicate that reducing remittance commission charges by just two to five per cent could increase the flow of formal remittances by 50-70 per cent, which would boost local economies.

Reducing the cost of sending each individual remittance encourages the delivery of lower value remittances, says the World Bank, at values far less than today’s average transfer of $200.

Previous data from Safaricom and Zain indicate that most Kenyans who use the service typically send smaller amounts, ranging between Sh1,000 and Sh2,500 at an average cost of Sh55.

In December, MoneyGram joined forces with SMART Communications, to kick off the pilot phase of its MoneyGram mobile money transfer service that allows delivery funds from any MoneyGram agent location direct to any SMART Money account.

For its part, Western Union has formed partnerships with mobile firms aimed at defending its share of the international remittances market, said to be worth US$300 billion.

The two operators will have to fight off a growing number of mobile service providers who have found that offering financial services through mobile handsets can add to the attractiveness of mobile money services, and help to retain customers to networks.

Rohit Bhatia, CEO of Seamless, a Swedish software company specialized in solutions for Mobile Money, prepaid e-Top Up, and Value Added Services, says the lack of basic services like banking and fixed internet, high growth markets will use the mobile phone as the main service enabler, especially for functional services like remittances, purchases and payments.

“Our research shows a major interest for such functional services in emerging markets, and this will drive innovation. These low ARPU (average revenue per user) markets’ and low income segments will adopt new functional services faster than the global average.

MNOs (mobile network operators) that recognize mobile money as a growth potential and a differentiator will emerge winners,” said Mr. Bhatia.

Players in the financial sector and mobile industry view mobile money as a fast, easy and new way for the un-banked to carry out their everyday money transactions.

“If MNOs can leverage existing airtime distribution networks, keep their proposition to stakeholders simple and yet innovative, expand slowly and steadily, simplify registration and subscription to the service, and above all, select a long-term business partner as their technology vendor, they are sure to be winners in the mobile money space,” said Mr Bhatia.

Mobile Payments Operator M-Pesa Ventures Abroad

With the recent expansion of Safaricom’s M-Pesa money transfer service to the UK, Kenyans abroad now have an additional cash remittance avenue besides the well-known Western Union and MoneyGram services.

According to Safaricom’s chief executive Michael Joseph, the firm plans to run the Kenya-UK service for three months before expanding to other markets.

“We would like to introduce the service to Uganda, the United Arab Emirates and US, but only after we comply with regulatory issues in those countries,” said Mr. Joseph.

To send money to Kenya using the service, users will be required to identify themselves, provide the recipient’s name, Kenyan mobile number and the amount being sent in pounds Sterling.

With transaction fees ranging from $5.6 to $9.6, the transfer is converted to Kenya shillings at the day’s prevailing exchange rate, thereby guarding against exchange fluctuations as it is an instant transfer.

Currently, the maximum amount that can be transferred internationally through M-Pesa is $350 with the amount allowed per month from a single sender in the UK capped at $14,000.

M-Pesa, which was launched in Kenya in 2007, had a subscriber base of 7.3 million by end of July, served by an agent network of over 12,000, with cumulative person-to-person transfers of $2.7 billion. The volume of monthly transfers is $2.5 million.

The move to launch the service in the UK is seen as one meant to tap into the international remittances market especially from Kenyans living and working abroad.

M-Pesa Used in Job Scam

A sign of maturity in the development and use of new products is its adaptation to use by criminal elements. M-Pesa the highly successful Kenyan mobile payment system is no exception as this investigative report from Kenya’s NTV shows.

Mobile banking services in Kenya

The use of Mobiles for banking and financial services continue to proliferate at a rate that is hard to keep abreast of. Standard Investment Bank in Kenya has added to this with the introduction of a new value added short message service (SMS) to its clients, which provides for mobile trading on the Nairobi Stock Exchange.

Click on the Blog Post to get the details.