Having overcome attacks on its non-bank business model, Kenyan mobile phone payments service M-Pesa continues to forge ahead at an impressive pace. With its long-delayed UK-Kenya remittance now in place, M-Pesa appears set to achieve more significant user and transaction growth in 2010.
Despite harsh criticism levelled at its non-bank business model, Kenyan mobile phone-based money transfer service M-Pesa continued to go from strength to strength in 2009, ending the year with some 8 million users, or about 21 percent of the country’s population.
A joint venture between UK mobile network operator (MNO) Vodafone and Kenyan MNO Safaricom, M-Pesa appears set to build on its success in 2010 thanks to a number of innovative service enhancements. The latest of these follows an agreement with Kenya’s ATM and electronic POS network operator Kenswitch to allow bank customers to send money to M-Pesa accounts by means of an ATM transaction.
Family Bank has become the first Kenyan bank to announce its participation in the new service, Chapaa Chap Chap (CCC), which comes at a KES0.50 ($0.01) fee over and above the normal M-Pesa fee. Kenswitch, which is owned by a consortium of Kenyan banks, provides switching services for some 650 ATMs.
A significant enhancement brought about by the CCC service will be consumer convenience, in that it eliminates the need for bank customers to withdraw cash at an ATM and then seek an M-Pesa agent to make a deposit into their M-Pesa account before undertaking a transfer. The CCC service also enables bank customers who are not M-Pesa account holders to undertake transfers to M-Pesa accounts.
This CCC service also overcomes one of the problems faced by M-Pesa – cash float constraints experienced by some of its 13,300 agents in Kenya, especially in rural areas where consumers more frequently make cash withdrawals than cash deposits. According to Safaricom, M-Pesa’s monthly person-to-person transactions volumes in September 2009 totalled $302 million, up from $183 million in January 2009, while by the end of September 2009 transactions totalling $3.4 billion had been processed since the service’s launch in 2007.
Opening the remittance door
The CCC service follows another significant breakthrough made by M-Pesa in October 2009, when it launched a mobile phone remittance service between the UK and Kenya. First mooted in March 2008, the launch was delayed by regulatory hurdles which were resolved following negotiations – including those relating to foreign exchange issues between the Bank of England and the Central Bank of Kenya.
The M-Pesa remittance service functions on the same short message service (SMS) platform used domestically in Kenya, providing an almost real-time service. Recipients of a cash transfer receive an SMS notifying them of the transaction details, including receipt number, the amount in Kenyan shillings, the account balance, the time the transfer was sent and the sender’s name and location. The sender is also sent a confirmation SMS. M-Pesa account holders can then withdraw the cash at a M-Pesa agent or use it to make other payments. Remittance recipients who are not registered for M-Pesa and who are sent money via Western Union, one of M-Pesa’s three partners in the UK, may collect their money from a Western Union agent and are also are invited to register for M-Pesa within 21 days to receive their remittance direct to their M-Pesa account.
M-Pesa’s other partners in the UK are Kenya’s television service KenTV, which has established five M-Pesa agent branches in the UK, and Provident Capital Transfers, which was established to undertake M-Pesa transactions.
The maximum amount that a sender in the UK can send per M-Pesa remittance is £250 ($400) while the monthly maximum is £1,000. Fees charged by Western Union for M-Pesa remittances are £4.90 up to £100 and £6.90 for amounts between £101 and £200. Provident Capital and KenTV have lower rates of £4 on amounts up to £150 and £6 on amounts between £151 and £250.
According to Safaricom, these fees are competitive for amounts of up to £250. This is supported by data from remittance cost comparison website SendMoneyHome which, for example, shows the fee charged by Barclays Bank for remitting £250 from the UK to Kenya at £25 with an expected transfer period of between one and eight days. HSBC charges £17 for a £250 transfer with a transfer period of from one to four days.
For Safaricom and Vodafone the UK-Kenya remittance corridor represents a potentially significant market, with the Central Bank of Kenya reporting remittances from abroad to Kenya of $611 million in 2008, up from $573 million in 2007. Inbound remittances in the first 10 months of 2009 totalled $505 million.
Indicative of the uptake of the UK-Kenya remittance service, UK newspaper The Guardian reported that in the first two weeks of its operation, more than 10,000 user accounts were set up and more than $100,000 transferred.
Safaricom and Vodafone have indicated that once the UK-Kenya service has bedded down similar services likely to be launched from other countries, including neighbouring countries in East Africa.