INDIA:M-Pesa to start pilot scheme on cash-out services in April

MARCH 18,2014.

BUSINESS STANDARD. 

M-Pesa, the mobile wallet service of telecom major Vodafone, plans to launch out-cash services. A pilot programme will be launched soon, under which customers will be able to withdraw money from M-Pesa outlets.

Suresh Sethi, business head of M-Pesa at Vodafone, told Business Standard: "The pilot will be starting some time in April. We will be defining the pilot parameters as we go down the line."

The company has about 45,000 business correspondent outlets offering all services including enrollment for M-Pesa services, cash-in and cash-out, Sethi said.

"We are very selective on the outlets, because these outlets have to have the ability of carrying cash. They have the ability of investing and carrying e-money - these are the only two things I think the outlet need to have. When you walk in with cash and ask to put the money into M-Pesa, you need to have an e-money balance for that. And if you walk in and would want to withdraw money, you have to have the cash there. That is why outlet selection is very critical," he pointed out.

The mobile wallet has about a million customers. "We should be moving pan-India in the next couple of months. Currently, we are there across India except the southern states. We are launching in Chennai on March 24 and will follow up with other states," Sethi added.

The company has to meet certain guidelines to offer money transfer and cash-in and cash-out services and cannot go to any outlet selling e-recharge offering.

Speaking about how a telecom company manages banking activities, he said telecom brings in a strength of distribution. "They (telecom firms) are very adapted managing the huge distribution. Telcos today also do millions of transactions a day. And the transactions involve accepting the cash and giving out e-recharge," he said.

For Vodafone, M-Pesa is a critical component of its strategy. "Today, you are sticking to me because I provide you voice services and data services. Tomorrow if I am moving your entire payment and banking on to your mobile, I have the ability to make sure that you are much more connected to me and loyal to me. It is a very integral part of our strategy," Sethi added.

Besides, the customer has to stick to the account, because the mobile wallet is affiliated to a particular number. Even though the mobile number is portable, the mobile wallet cannot be changed.

In terms of challenges, Sethi said a telco works in a very different risk-adjusted infrastructure compared with a bank. However, telcos should make sure that the risk compliance practices are in line with RBI norms.

Challenges such as plugging the scope of money-laundering through this route by making sure the funds are being tracable are among the things that the companies are alert on.