opinion


M-money is an idea whose time has come

In the first of a flurry of recent mobile-money-service announcements, Vodafone said last week that it would launch its M-Pesa mobile-money-transfer service in Tanzania later this month in partnership with Vodacom. Tanzania’s No. 4 operator, Zantel, responded by saying it would introduce its own mobile-money-transfer service, beating the launch of M-Pesa. Then the UAE’s Etisalat, which has a majority stake in Zantel, said it was developing an international money-transfer service with Indian operator Idea Cellular, HSBC India and Mashreq Bank.

Next up was Orascom Telecom Chairman Naguib Sawiris, who revealed that he planned to offer mobile banking and money-transfer services to Orascom subscribers through a new company to be set up later this year.

The established services – insofar as any are established in this new sector – are going great guns too. In Kenya, where M-Pesa debuted with Safaricom, more than 1.6 million people have used the service since it was introduced a year ago, transferring a total of KES9.3 billion ($151 million). A trial of international money transfers, between the UK and Kenya, is also under way. And in February, Vodafone launched the service – branded M-Paisa – in Afghanistan in partnership with Roshan. MTN’s MobileMoney mobile banking service, which the operator runs in partnership with Standard Bank, had 250,000 subscriptions at end-2007.

Mobile money is well suited to emerging markets, such as those in Africa, because a large number of people in such countries do not have access to conventional financial services but do have access to mobile handsets and services. International remittances – the sums of money that people send to their families in developing-world countries – represent just one potential part of the mobile money market. But the sums involved are large: international remittances totaled $230 million in 2005, according to the World Bank, equivalent to four times the size of all foreign aid budgets.

For mobile operators faced by declining ARPUs, mobile money services on which they can earn transaction-based fees – and which might not require major network investment – are an ideal value-added service. Sawiris was candid about this, saying that he hoped to earn an additional $1 a month from each subscriber through mobile banking services. Orascom had 58.8 million subscriptions on a proportionate basis at end-2007, so mobile-money services could be a big earner for Orascom if they are taken up widely.

Conveniently, governments and aid agencies are often eager to support and even fund the development and introduction of mobile money services because of the perceived economic and social benefits they bring. The UK’s Department for International Development gave Vodafone £1 million ($2 million) to support the development of M-Pesa.

Although the opportunity and attractions of mobile-money are clear, there are potential obstacles too. One is that of regulation. As a money-transfer system, M-Pesa escapes being classified as a banking service, which usually involves deposit-taking for the purpose of investing or lending. Other mobile money services might be considered to be banking applications, in which case operators will require a banking license and be subject to financial-services regulation. One way to meet those requirements might be to partner with a bank, as MTN has done. Operators will have to consider carefully whether what they plan to offer constitutes a banking service. That might vary from country to country. Regulations that are designed to stop money laundering might also have an effect on international money-transfer services.

But these are problems to be addressed rather than insurmountable obstacles. The GSMA’s Mobile Money Summit in Cairo next month is likely to be a hot ticket.


One comment

  1. Matjaz Rozman 16/04/2008 @ 2:02 pm

    Mobile operators has to stick to their business and leave money business to the banks.
    M-money, M-payment can succeed only in the business case are involved banks. M-transfers has to stick to be secure and simple.
    SMS technology is present everywhere.
    Also in Europe it make a clear case if in the business model are involved all parts e.g. mobile operators, banks, vendors and of course end customers.
    We think that (W)PKI solution can help to enable mobile payments secure and easy with low rate of risk and fraud potential for all involved parts in business case.

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