Will Mobile Money Kill banking?
Monday, January 31, 2011
Central Banks will Demand Authority over Mobile Companies
Conversations at receptions, luncheons and in the hallway at the World Economic Forum in Davos can be fascinating. Over lunch I sat with former stock exchange executive who is working to set up back end payment system for money transfers by mobile.
In developing nations where banking infrastructure is poor or non-existent, the growth of mobile payment transfer systems has been explosive.
M-PESA is the most successful mobile payment system worldwide. The system was only launched in Kenya in 2007 and today has more than 13.5 million customers and is used by more than 70% of Kenya’s households.
Only four million Kenyan’s have a bank account – but the majority of households own a mobile phone. M stands for mobile, pesa means money in Swahili. As of September 2010 the system facilitated cumulative transfers of $US7.4 billion. Just to put this figure in perspective the total GDP for Kenya is $US32 billion.
M-PESA in essence turns more that 20,000 retail mobile agents in Kenya into micro banks – allowing cellular customers to send and receive payments via their mobile. For a great video to understand the service click here.
M-PESA’s explosive success in Kenya has led it to expand into Tanzania, Afghanistan, South Africa and the company has plans to expand into India and Egypt and has led some analysts to predict that the mobile payment market will grow to $600B globally by 2013.
M-PESA has a profound impact on facilitating commerce and entrepreneurial activity. As a result, the Bill and Melinda Gates Foundation has committed $US500 million over five years to expand the system to help the poor have easy access to financial services. And here’s another reference for the Gates announcement.
The current banking system in Western developed nations rely on Visa, Mastercard, AMEX and direct debit and to a lesser extent cheques for fund transfers. Relative to M-PESA all these systems have high transactions fees.