Money Transfer within Kenya – Part II

Part I has come to pass with Safaricom’s new M-Pesa service enabling money transfer via cell phone.

Mzansi Kenya: The new technology does not pose a threat to banks as it operates outside banking circles. What banks should look out for is a populist attempt introduce mzansi style banking as they continue to report super profits year after year which are unfairly attributed to excessive fees they levy on their customers.

Visa, watch out: The next group to watch out for what’s happening at Safaricom should be Visa and other credit card manufactures in Africa. Cell phone airtime is virtual money – which is what debit and credit cards are – enabling customers and merchants to exchange virtual payments settled days later – at a substantial fee to both parties.

With cell phones, this is already happening but it’s just not formalized. The Option – Safaricom’s free magazine publication has a letter to the editor this month from Joe Nickson of Kerugoya (central Kenya) who paid his fare in a matatu (bus) by transferring 50 shillings airtime to the conductor’s phone and he received 30 shillings actual cash as change.

Airtime offers many more possibilities – 7 million cell phone (including more post-paid cell phone customers) vs. 100, 000 credit card users in Africa. Alongside his credit card terminal, a merchant can have a terminal with a dedicated cell phone line to receive virtual payments of airtime from Safaricom users making small purchases. At the end of the day, he’ll be able to check his virtual balance – and either re-sell the airtime to customers or use it to purchase other goods.

Another advantage of cell phone payments is they require no background checks or credit history.

Could Safaricom go to a higher level and enable online payments to enable their subscribers to buy over the web and pay by transferring payments to a website like Mamamikes or is that already happening?

16 thoughts on “Money Transfer within Kenya – Part II

  1. ncrwcc

    This is certainly a move in the right direction….funds transfer at minimum fuss and cost.

    NCRWCC is studying the operations of the new service and will soon be issuing a crime prevention advisory on its blog ( commenting on possible loopholes that may open to exploitation.

  2. ka-investor

    I would personaly be very impressed if what you are saying comes to pass. its very good that Safaricom have decided to make our lives easier. now we don’t have to cross our fingers each time we send money via P.O. Box …….

    However, i know this services will come with an associated high cost to the consumers. thats what always kills the enthusiasm of kenyans when it come to service delivery by many service providers.

    I can’t wait to see loopholes this ervices will bring along. NCRWCC keep us posted.

  3. MainaT

    Mpesa if implemented well and provided the obviuos concerns about security are addressed i.e. wapiga ngeta can still force u to reveal pin, will be a step forward for money transmission. The value-adding bit is for example for the farming community, is if safaricom were to set up auctions for farm produce.

  4. imnakoya

    Thanks for the information. I did a post on Grandiose Parlor about using pre-paid minutes as virtual currency in Nigeria. I mentioned Safaricom, I didn’t even know they have this M-PESA stuff on ground then. The Safaricom initiative can be and should be replicated in other regions…in Nigeria between just 40-60% of the productive population use banks for their financial transactions.

  5. bankelele

    ncrwcc: agreed, but we should focus on opportunities, not just loopholes.

    ka-investor: many, many services are still going to rely on p o box as it is the main delivery channel for rural kenya and also the legal system

    §anaa: Developes from developed countries develop products for development country customers and vice versa for developing countries.

    M-Pesa shoudl work well and if merchants instal M-Pesa teminals in premises, alongside credit cards, it will enable so many more customers to make online payments in addition to money transfer.

    as for identity, Safaricom and Celtel have both tried and testted the pre-paid (anonymous) versus post-paid (identified) subscriptions and the pre-paid won by a mail and put safaricom where it is. If I want to buy a book online and I can pay by M-Pesa, there’s no need for the vendor e.g. Amazon or Mamamikes to know who I am or why I should have a
    credit card

    MainaT: Wapiga ngeta are always refining & improving their tactics. Safaricom, banks, cops, and companies can only predict so many scenarios and then react to occurences after e.g. PIN’s and daily withdrawl limits
    – There are a couple of companies developing farm produce auction systems via phone

    imnakoya: I now realise M-Pesa can go beyong airtime and into debit card territory. Also I believe Kenya has a lower banking penetration than Nigeria – about 25 – 30% so M-Pesa can have a big impact.

  6. Josh

    Wow, it is amazing just how innovation springs forth out of things that the manufacturers themselves couldn’t have anticipated. To use airtime as virtual money is brilliant, ingenious and totally African. I see a whole lot of potential here.

  7. Anonymous

    It will be interesting to see how Safaricom caters for fraud in Kenya where financial crime (theft of cards/money) is done with impunity. The legal mechanism is weak which can limit M-pesa use. Visa/Mastercard limit $800/day on Money transfer..even westernunion/moneygram allow upto $800/transaction on credit card. As someone who has suffured credit card fraud, caught the people do store and used the cards, turned them to police and nothing happened, i will give a wait and see. If they beat fraud, they have it, else M-pesa will be limited to small transactions.

  8. Anonymous

    Actually the technical implementation would not be big hurdle. There are plenty of open source tools and examples. I would recommend WebServices. Currently e-bay and amazon allow for integration with their websites using real-time webservices. Anyone intrested and use their documentation and examples to test their sites capabilities, and then move on to greater integration. Paypal integration is another example.

  9. Anonymous

    Of course this is a very interesting move by Safaricom to bring money transfer services closer to customers including the largely unbanked rural folks. Kudos to them.

    Certainly every such product that involves money will always come with a risk as we all know out there are charecters who are always trying to reap where they haven’t sown. Be on your guard always

  10. dominic

    Hi all,

    iam terribly disturbed by a case that was in court on monday where a Bulgarian national was arrested and charged with fraud using ATM cards.
    He was arrested in Lavington Green within Nairobi as he and his four accomplices were withdrawing money from a Pesapoint outlet. He is alleged to have been in possession of 13 BLANK ATM cards which he was using to withdraw money from different accounts.
    How is this done when the holder of the ATM is the only person with the secret PIN.
    Why are banks not raising the alarm when many of their clients are losing millions of shillings to fraudsters everyday?
    Are ATM cards a safe form of transacting business?

  11. Anonymous

    Hi Dominic, The Bugarian fraudster was using cards that were skimmed in Europe and then used across africa to defraud Euorpean banks. The crooks steal magstipe and PIN data using fraudulent hardware and CCTV coverage. Note that this is in Europe. They sell this data to the syndicates who manufacture cards in africa, asia etc. for use to draw cash from atms like pesapoint. The loss is the European banks loss.

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