Banks lose out as M-Pesa goes global with MoneyGram deal


MARCH 03,2014.


Safaricom’s push to take its mobile money transfer business global has received another boost with the signing of a deal that will see users of MoneyGram send cash directly to M-Pesa customers from any part of the world.

The deal, signed by UK telecommunications company Vodafone — which is Safaricom’s majority shareholder — will allow users of MoneyGram in about 200 countries to send money directly to M-Pesa subscribers’ mobile phones.

“There is huge demand for sending funds back (home) to family and friends,” said Michael Joseph, former Safaricom CEO and currently managing director in charge of mobile money at Vodafone.

The new deal comes just weeks after it emerged that Safaricom was on the verge of signing a similar agreement with UK-based online payments and cash remittances company Skrill, which has capacity to handle transactions and money transfers in 41 currencies.

The partnerships will see Safaricom tighten its grip on diaspora remittances, which have been a main source of commissions income for commercial banks.

Diaspora remittances rose by 10.2 per cent last year to Sh111 billion ($1.3 billion), attracting the interest of money transfer companies targeting commission fees from the transfers.

Remittances from Kenyans working abroad are the fourth-largest source of foreign exchange after tea, horticulture and tourism. The partnership between Vodafone and M-Pesa is set to be launched by June.

Safaricom is riding on M-Pesa’s wide reach of its nearly 18 million customers to win deals with the global firms.

The deal also mirrors another signed between Safaricom and international money transfer network Western Union in March 2011.

The World Bank estimates that formal channels such as Western Union, MoneyGram and Xpress Money handle about two thirds or 64 per cent of remittances to Africa.

About 17 per cent of the remittances are channelled through commercial banks, while foreign exchange bureaus, postal money orders and personal deliveries were used to send the remaining portion.

M-Pesa’s earlier plans to go global were delayed by concerns over stringent international regulations against money laundering and financing of terrorism.

“This agreement furthers our goal of joining with fast and reliable mobile wallets so consumers may send money for life’s essentials anywhere and any way they want, simply and conveniently,” said Alex Hoffmann, senior vice president of global product management and emerging channels at MoneyGram.

Vodafone and MoneyGram did not provide details on whether there will be extra charges to send money to M-Pesa compared to ordinary transfer charges for cash channeled through bank agents.

It is likely that the service will debut in the US and Canada — which accounted for about half or 49 per cent of total remittances to Kenya last year — as well as key European source markets such as the UK and Germany, which contributed 27 per cent of total inflows.

Safaricom, which listed on the Nairobi bourse in 2008, is 40 per cent owned by UK-based Vodafone, 35 per cent by the Treasury and the remaining quarter by the public.

MoneyGram, which is based in Texas, US, has enabled online remittance transfers to M-Pesa through its website or via a mobile app available on iPhone, Android and Windows 8 phones.

Safaricom has 67,000 M-pesa agents from which customers can withdraw money, making it much more convenient than going to queue in often crowded banking halls.

The telco’s partnership with Western Union allows M-Pesa subscribers in Kenya to receive money from 45 countries.

The firm has taken to such innovations to grow earnings from the mobile money platform, which raked in Sh21.8 billion or 17.5 per cent of total revenue in the year to March 2013.

Mr Joseph said an estimated $90 billion (Sh7.7 trillion) is transferred to M-Pesa markets from around the globe including Kenya, Tanzania, India, South Africa, Egypt, Democratic Republic of Congo, Fiji, Lesotho and Mozambique.





The firm has also expanded the spectrum of services under M-Pesa beyond money transfer to include payment of utility bills shopping and receiving dividends.