Mobile phones lower the cost of business

Money Transfer Within Kenya Part 3

A comment from @alykhansatchu on Money transfer lead to an update of the first post about money transfer from about 3 ½ years ago before the advent of mobile money transfers.

At that time, the cost of sending 10,000 shillings (then about $136) within Kenya was Kshs. 1,700 ($23) with Western Union and 1,850 ($25) with Moneygram – working out to a remittance cost of about 17% – 19% for an instant money transfer. This was mostly done at a few commercial bank branches, some foreign exchange bureaus, and at post offices around the country within banking hours.

90% savings: A lot has happened in the last few years mainly in the form of the arrival of money transfers via mobile phones by MPesa from Safaricom and more recently Zap from Zain.

A recent post last week noted that Western Union in Kenya have just lowered transfer costs to flat rates of 2% i.e. almost 88% cheaper than what they were at the time.

In the last few years, millions of Kenyans have moved on to mobile phones for money transfer and I can’t recall anyone who uses banks for these transactions. Mobile phone have maximums of about $430 (35,000 shillings) for money transfers, but this is more than enough to cater for most remittances, including the emergencies that necessitate instant transfers.

And mobiles are still cheaper; the 2% western union charge to transfer 10,000 shillings works out to about 200 shillings. A transfer of the same amount by Zap costs 75 shillings (0.75%) and 105 shillings (1.05%) by M-Pesa (after combining sender and receiver fees)

International remittance to get cheaper?: Zain hope to link Zap to allow transfers to customers of Zain in different African countries. And Safaricom are setting up a link for transfers from the United Kingdom to Kenya. When these are established, we should also see the cost of internal remittances, whose sometime high cost is a cause for complaint for many Africans in the Diaspora, also drop significantly.

12 thoughts on “Mobile phones lower the cost of business

  1. 23Adam

    Hey Banks….

    I will be in Nbo next month for a few months. Do you have any suggestions, on what is the most affordable ( buck for your money) internet connection, unlimited use? Thanks..

  2. pesa tu

    The lower charges show that money transfer as a stand alone business is unsustainable.every year the costs keep the end of the day its a volume business.

  3. myroadtowealth

    Mobile technology will obviously play a bigger and bigger role in Kenyan society due to the low cost of acquisition and low transactional costs involved. When international money transfers via mobile become a reality, the likes iof Western Union will find the going very tough!

    Mobile banking will also see a huge uptake among the unbanked population who (presumably) still stash their savings under their mattresses.

    If what happened to the Israeli woman who (literally!) trashed a million dollars is anything to go by, then mattress banking has no place in modern society

    The unbelievable story maybe found here:

  4. Maishinski

    …and all the while I thought a “Matress Account” was just an idiom.

    One takeaway from that story: Financial Risk is part of life – even if you literally sleep on top of your money.

  5. bankelele

    Kainvestor: unlikely. the agents and resellers of m-pesa have a very strong reach while the Zap ones must be reading about another Yes/Kencell/Celtel/Zain makeover with uncertainity

    23Adam: go with PesaTu’s recommendation

    Pesa tu: It took awhiel for this to happen localy, and the international market it still western union domain

    Biche: indeed, hard to believe it cost 1,700 to send 10,000 a few years ago!

    myroadtowealth: Mobiles should open up and let users and third parties build applications that will enhance their reach in society and among the unbanked

    Maishinski: now the mattress is in the phone

  6. myroadtowealth

    I use my phone to check my accounts without having to go to the ATM and also pay bills. As for security, the phone only allows me to transfer money to my other accounts so a thief/hacker would not be able to transfer money from my account to his. Touch wood!

  7. Eliza Anyangwe

    The potential of mobile phone tecnology in Africa is immense – not just as a means to access market information but also as a means of improving access to healthcare.
    A recent blog on the Guardian Katine project website talks about a Ugandan government initiative to use mobile phone technology to improve healthcare in rural parts of the country.

    The Katine project is a joint rural development initiative between The Guardian Newspaper and African NGO AMREF. The website dedicated to it, promotes transparency and offering the world a more positive and complete picture of developing countries.

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