Mobile Money Africa

ZACHARY OCHIENG

Banking in Kenya is fast moving away from brick and mortar as more customers embrace
m-money services. Notably, M-Pesa, Kenya’s pioneer mobile money transfer service
operated by listed mobile operator Safaricom, has so far registered 9 million customers.
The service—launched in March 2007—has revolutionized money transfer services in the
country by providing Safaricom subscribers with a fast, safe and affordable way to
transfer money by phone. An innovative solution that enables customers to transfer
money by phone, M-Pesa, initially targeting the unbanked population, has become the
most popular and convenient money transfer service due to its low transfer charges and
availability among the rural population.

“By Christmas last year, we had 9 million registered M-Pesa customers. The fact that we
have achieved such growth in less than two years is testimony to the relevance of M-Pesa
to Kenyans”, Michael Joseph, Safaricom CEO told a media briefing in Nairobi recently.
Joseph thanked the media for highlighting the benefits of mobile money transfer service
in a society where millions of Kenyans have limited or no access to financial services, a
situation that previously forced them to rely on informal methods of money transfer.
Kenya is the first country in the world to use M-Pesa, thanks to a joint venture between
Kenya’s Safaricom and the British cellular giant Vodafone. The service has since been
extended to the Kenyan Diaspora living in the UK, who are currently able to send money
to their loved ones in Kenya using M-Pesa.

Since its launch in 2007, M-Pesa continues to grow in popularity and functionality.
Besides person to person transfers, customers can now pay utility bills and receive small
value payments like benefits and salaries from businesses. Last year, the mobile giant’s
shareholders received their dividends through M-Pesa. It is noteworthy that through these
new functionalities, M-pesa has partnered with over 40 organisations, some of which are
bank and non-bank financial institutions. Currently, 300 bank branches offer M-Pesa
services. With over 7000 agent outlets employing more than 12,000 people directly and
indirectly, M-Pesa records an average of 10,000 new registrations per day. In a move
aimed at allowing customers access to their money 24 hours a day, Safaricom last month
partnered with Equity Bank, Kenya’s fast growing commercial bank, to introduce a
service that enables customers withdraw cash from the bank’s ATMs without using an
ATM card.

Joseph reiterated the safety and security of the service, dispelling fears that customers
could lose their money.

“I assure all our customers and Kenyans at large that M-Pesa is secure. Every account is
PIN protected and in the event that a phone is lost or stolen, their money can be recovered
from their M-Pesa account once they replace their SIM cards”, Joseph assured, adding:
“The collective monies held on M-Pesa at any given time are held on trust in a bank
account on behalf of the beneficiaries and is insured; Safaricom cannot access or utilize
these funds”.

However, he reiterated that M-Pesa cannot guarantee refunds for monies sent to wrong
accounts and urged customers to always verify the phone numbers they are sending
money to. But soon, the M-Pesa platform will be upgraded to enable customers send
money directly from their phone books instead of keying in the recipient’s mobile
number.

“Vodafone and Safaricom have strict policies on anti-money laundering which are
internationally benchmarked and include appropriate know your customer procedures and
transaction monitoring”.

Joseph also clarified that the Central Bank of Kenya (CBK) has oversight and supervision
of M-Pesa and that Safaricom consults with the bank regularly, particularly regarding any
planned changes to the product.

The service has won various awards both locally and internationally. They include the
Kenya banking Awards 2007/2008, the Marketing Society of Kenya Best product
innovation 2008, the Stockholm Challenge 2008, GSMA 2008, Africom 2008 and the
World Business &development Award 2008.

Following its success, traditional banks, which were initially jittery that M-pesa was
encroaching on their core business territory have since partnered with Safaricom to offer
mobile banking services to their customers. Other mobile operators such as Zain Kenya
and Yu have also followed in the footsteps of Safaricom to launch mobile money transfer
service

Technology savvy fraudsters have stolen an estimated Sh21 million from Kenya’s revolutionary mobile phone-based money transfer system, M-pesa.

Michael Joseph, the chief executive of Safaricom — the telecoms operator that owns M-pesa — said the operation has reported suspected or actual fraud in 0.006 per cent total transactions since its inception three years ago.

“Suspected or actual fraud stands at less than 0.006 per cent of all recorded transactions with a downward trend,” said Mr Joseph.

He declined to disclose the exact figures, saying Safaricom had shared the data with regulatory authorities who have the mandate to receive such reports. M-pesa has handled an estimated Sh350 billion since it was launched three years ago.

Increasing attacks

The revelation of M-pesa’s loss comes in the wake of reports that the financial services industry has come under increasing attacks from cyber criminals since Kenya entered the world of high speed internet with the landing of fibre optic cables in the country mid last year.

The financial services sector loses more than Sh100 million to cyber criminals every month, according to the Central Bank’s anti- fraud department.

Anti-fraud experts have feared that M-pesa’s unparalleled success in the money transfer business would catch the attention of cyber criminals and expose the system to huge losses, but the revelation that the money transfer platform has lost less than one per cent of the total cash moved should help clear any concerns over its safety.

Industry sources said M-pesa’s extensive network of 16,000 agents and nine million customers presents a massive security challenge to its managers and that the low level loss is an indication of how far the company has invested in securing the system from cyber criminals.

M-pesa said the number of attempted fraudulent transactions has been rising since last year, but most have been unsuccessful.

“A month does not pass without a new form of fraud. These people are very innovative,” said one agent who declined to be named.

The latest form of fraud targets agents and Safaricom.

The criminals send themselves self-made M-pesa messages indicating that the recipient can withdraw up to Sh35,000, the maximum amount allowed for a transaction.

Subscribers, however, hold up to Sh50,000 in their virtual accounts.

The messages look exactly like the authentic M-pesa texts, but come with made-up codes that have helped agents expose the fraud.

Mobile Union Ltd announces the launch of its new online remittance service (http://www.mtxpress.com), mtxpress, which uses a secure SMS platform to provide a low-cost and convenient solution for people in the UK to send money to friends and family abroad.

According to the most recent DFID UK Remittance Market Report, the UK is one the top 10 remittance-originating countries worldwide, with approximately GBP2.4 billion recorded outward remittances annually from the UK to the developing world. Mobile Union is taking a new approach to remittance by focusing on a massive under-served market segment: people who want to send smaller amounts of money without being penalised with high fees. Mobile Union’s service enables people to send money safely and securely from their home or workplace without the need to visit a retail location; immediately stripping out the costs in time and money associated with a retail infrastructure and passing on these savings to customers. After registration online, with a user-friendly, simple and easy interface, customers can then send money securely using their debit card. Within seconds, the recipient is notified by SMS message that money is available for collection, leveraging the ubiquitous reach of mobile phones throughout the developing world.

Steven Faulkner founder and Commercial Director of Mobile Union commented:”mtxpress makes sending money home fast and convenient (http://www.mtxpress.com). A combination of simple pricing and exchange rates directly linked to the Central Bank rate makes it easy to understand the true cost of sending money home.”

Security is of paramount importance to Mobile Union and there are multiple bank-grade security checkpoints for both the sender and recipient of the remittance, enabling customers to have certainty throughout the transaction lifecycle leading to complete peace of mind. In addition, Barclays Bank is providing the day-to-day banking and merchant services and Cybersource, the world’s first online payment management company, processing debit card transactions.

This week’s launch focuses on the UK to Bangladesh market, where Mobile Union has collaborated with BRAC Bank, one of the leading banks in Bangladesh. This partnership will enable recipients, without the requirement of a bank account, to utilise the bank’s extensive network of locations across the country to receive money. However, it is also possible to credit accounts maintained at BRAC Bank.

This template is one that Mobile Union will continue to use as it rolls out its service to other parts of South East Asia and West Africa later this year, providing an accessible service to the underserved.

Speaking about the launch of the service, Randall Harper, CEO for Mobile Union said: “The UK’s remittance market continues to grow, but little attention has been given to people who want to send smaller amounts of money without incurring the high fees. Through our mtxpress service and its secure SMS platform, we are able to provide this under-served segment of the market with a world-class service that is convenient, instant and great value-for-money.”

Sahra Abdi

NAIROBI – About a year ago, Muqtar Ali’s brother was shot dead by gunmen in the busy Bakara market of Somalia’s capital Mogadishu, and his $200 in cash was stolen.
Ali says that if a new mobile money transfer service unveiled by Somalia’s biggest mobile telecoms firm last month had been in place then, his brother would still be alive.

Telecoms firm Safaricom pioneered mobile money transfers in neighboring Kenya and now has 8 million users. Besides transferring cash to friends and relatives, people pay power bills and even receive dividends from some companies.

Hormuud Telecom, the biggest network in Somalia with more than a million subscribers, says it designed the software for its SAAD money transfer service, but was helped by Safaricom workshops and consultants.

The new service is expected to cut security risks posed by carrying huge wads of the Somali currency around various open markets in the battle-scarred south and central regions of the country.

Once clients have registered for the service, they can deposit cash with the mobile phone company and credits are loaded onto their phone. They can then send to other people signed up for the service at the press of a button.

“I was very sad when I heard my worst news, that of the death of my brother. He was transferring some cash to my shop when the robbers shot him,” Ali said.

“I believe the life of my brother would have been saved if this service existed then.”

LIFELINE

Despite 19 years of anarchy in the Horn of Africa nation, some businesses have thrived and the country’s mobile phone firms provide a crucial, cheap lifeline for Somalis to stay in touch during the frequent bouts of heavy fighting.

Money transfer firms are another backbone of the economy as remittances from the large Somali diaspora, estimated at around $1 billion a year, keep many Somali families alive.

“This is the lifeline of the whole economy … and they are the future banks of Somalia,” Central Bank Governor Bashir Issa Ali told Reuters.

Ali said the introduction of Hormuud’s mobile money transfer services alongside the remittance companies would only improve cash distribution throughout the country, where 1.5 million people rely on food aid to survive.

“Somalia has been saved by the money transfer companies and the telephone companies,” he said. “This is a great thing for the payments system.”

Hormuud’s money transfer system works with U.S. dollars, rather than the Somali shilling, and users can transfer up to $3,000 a day throughout southern and central Somalia.

Businesses prefer transactions based on the dollar and other regional currencies such as the Kenyan shilling, UAE dirham and the Saudi riyal, to avoid the problems associated with an extremely weak Somali shilling.

“They can send and receive cash through this system locally,” Hormuud’s spokesman Abdirashid Ali Aynaanshe told Reuters by phone from Mogadishu.

“The system is safe, and the probability this cash can be in danger is less than carrying cash or checks in the pockets or bags while traveling in the country,” he said.

Halima Mohamed, based in the southern port of Kismayu which is held by al Qaeda-linked rebels, says she now uses her phone as a bank account and sends money to business associates as far as Baidoa in central Somalia.

“Nowadays, I am able to send up to $3,000 from my phone to people in other regions without the person next to me knowing,” the store owner said. “It is good for our safety since we live in very violent times and can lose all our money to militias.”

Vodafone,last month signed an agreement with Afric Xpress (AX) to introduce txtnpay services which would allow Vodafone customers to purchase airtime anytime, anywhere via sms message to short code 1075.

The mobile phone-based secured and convenient payment system, created by New York-based Afric Xpress, would also enable registered users to send money to anyone with a mobile phone, pay utility bills, buy pre-paid airtime, check bank accounts and purchase goods and services.

Mr. Nvalaye Korouma, Chief Executive Officer of Afric Xpress, who signed on behalf of his company, said the prospective users would have to register with any of the over 400 agents across the country and create an electronic wallet into which they would make a flexible deposit.

“To open a txtnpay wallet one needs to fill the physical registration form and present a valid photo ID copy for verification and a text message with your registration details will be sent to your phone,” he said.

He said the approved agents of txtnpay were banks, internet cafes and other outlets that were already in partnership with AX to offer services, adding that these partners were carefully selected after a rigorous screening process.

Mr. Korouma said from early 2009, when AX started operations in Ghana, it had processed more than half a million transactions via its txtnpay platform, adding that the agents could confirm the security and efficiency of the system.

Mr. David Venn, CEO of Vodafone Ghana, said he was confident that the service was innovative and would ensure convenience and safety for its customers.

“Now when your credit finishes at even 02.00 hours in the morning you can send a text message to 1075 at the standard sms cost and receive credit on your phone instantly,” he said.

Afric xpress is an electronic payment solution provider focused on mobile payment systems particular in collaboration with telecom operators in Africa.

Ghana is its first country of operation in Africa.

WASHINGTON GIKUNJU

Global payments technology company Visa International is courting mobile phone network operators with a view to tying up partnerships that could give the company a foothold in the emerging mobile phone banking services, the group’s general manager for Sub Saharan Africa has said.

Charles Niehaus says the company, which develops plastic card technology for use by banks and retail sellers, is faced with an important choice of “whether it should align its products or compete with the new mobile phone banking and money transfer services.”

Speaking last week when he announced that Kenyan holders of Visa International branded plastic cards had clocked two million, Mr Niehaus said the company sees mobile technology as an opportunity to expand its customer products rather than a threat to its existence.

“Visa has also come up with a mobile money transfer solutions, we are talking to several international mobile phone companies and will reveal some of the new products in the next three to four months,” said Mr Niehaus.

The company has, however, not entered into talks with any of the four local mobile network operators.

Safaricom’s ‘M-pesa’ earned the distinction of being the world’s first mobile phone based money transfer operator when the Kenyan telco rolled out the service in 2007.

Since then the service has attracted over eight million users while Zain, operating in over a dozen African countries, has also launched the ‘Zap’ service as a cross-border money transfer solution.

Both M-pesa and Zap have signalled their inclination to outgrow basic money transfer service by adding on other e-commerce solutions, helped by the cut-throat competition in the market.

While credit and debit card usage in the developed world is widely popular with individuals even holding multiple cards, Africa lags in its adoption of plastic money and providers such as Visa and MasterCard see the continent as a strong growth frontier.

Mr Niehaus says Visa’s 50-year experience and brand name as a payments solutions provider gives it an edge when negotiating for terms to either team up with handset manufacturers or network providers to offer mobile banking services which have become a hit with a majority of Africa’s unbanked.

The continent has over 290 million mobile phone users but only a small fraction has bank accounts, providing a huge potential for any player who cracks the formula for getting them in the formal financial system.

Only about a quarter of Kenya’s estimated 17 million strong bankable population have bank accounts while over 35 per cent of these rely on informal financial service providers with the rest totally excluded from the formal financial system.

Total purchases in Kenya using Visa cards last year topped Sh250 billion ($3.3 billion); out of which a tenth were transactions made using credit cards while 90 per cent were payments made through debit cards.

Twenty two out of Kenya’s 43 commercial banks use the Visa card technology which has been available locally for 19 years, with 80 per cent of Kenya’s plastic card holders having Visa International branded cards.

The company offers a seamless payments system network that is usable in 200 countries worldwide, and is present in over 45 African countries.

Central Bank of Kenya statistics show the country had an estimated 2.5 million ATM, debit, credit and charge card holders by June 2008.

New laws

I&M Bank became the first institution to acquire a licence from Visa to offer a complete online based e-commerce platform following last year’s enactment of laws allowing electronic transactions in the country.

“We are in talks with other banks as well, the interest for e-commerce payment solutions is big,” said the Visa International country manager Victor Ndlovu.

Scola Kamau

Equity Bank has announced its intention to join mobile banking.
This was revealed last week by Equity Bank Uganda’s Executive Director Apollo N. Njoroge during the official opening of the bank’s branch at Oasis Mall in Kampala.
The service, dubbed Eazzy 24/7, targets Equity Bank customers with mobile phones.

“It will enable customers to conduct all transactions from any place of convenience within the country,” said Mr Njoroge.
These services include; fund transfer, balance inquiry, mini statements and bills payment.

Equity Bank becomes the third bank to join mobile banking after Standard Chartered and Stanbic Bank launched similar services last year.

Mr Charles. W. Nalyaali, the managing director of Equity Bank, said mobile banking will give Equity a new push.

“The bank has over the years built a reputation of having created a business model that offers solutions but will now offer more access channels and services,” he said.

Although there are over 23 registered banks in Uganda, the bankable population stands at only three million, with Equity having 350,000 customers.

Equity is rated the fifth most capitalised with 43 branches and 48 ATMs around the country.

As the East African Community marks its foot prints within the region, Equity Bank has gone ahead to spread its services to almost the entire region.

The bank is expected to meet stiffer competition from telecommunication operators like MTN and Zain who are edge deep into money transfer services on the Ugandan market.