Banking on a mobile phone

It has been long since I wrote anything new on this blog, but after coming across some interesting information on banking on mobile phone, decided to put this up.

First, I would like to acknowledge the sources of the information that am about to blog;

Christine Bowers, 'How banking on the mobile phone can help the poor'
Kenneth Kwama, East Standard, 'The next big thing'

The interest in this came about when I had to go for a SIM replacement from Safaricom. What struck me most, was the unsual green color of the SIM card. For some of us perenial mobile phone losers, we had gotten accustomed to the trademark black SIM card. Upon enquiry from the customer care rep at the dealer shop, I was informed this was the new generation SIM card from the 'better option'.

The menu embedded on the SIM card is more extensive, with some new features that are not yet supported by Safaricom - of which M-Pesa was of interest.

Apparently M-Pesa is an acronym for Mteja-Pesa, a low-cost money transfer that transforms your traditional phone into a banking instrumet (think of it like PostaPay!). The idea behind it is so simple! It will allow the mteja to borrow, transfer and pay money using SMS texting, and also access virtual loan accounts!

That is M-Banking or Mobile Banking, which has come of age in Kenya!

What I had not known, is that Safaricom had been running a pilot project in Thika with 400 wateja. And another 600 have tried the system in 8 dealerships in Mathare and Nairobi CBD last year.

It is expected to be launched nxt month, and what stands between Safaricom and the M-Pesa service is CBK's approval as the digital money service is financial in nature.

The possibilities of the service are staggering. Imagine what would the banks fare in the heat of the competition that is bound to be generated. For those poor Kenyans who cannot afford to open (let alone maintain) an account with the banks, this would be the most fastest ad secure means of sending money.

Reminds of the newly launched PostaPay money transfer of Posta that has taken the breathe out of the domestic money transfer service providers like MoloLine and Securicor (I know they are not meant for financial transfer ). All the customer has to do, is approach the dealer, pay the amount that you want sent to the Safaricom account, get issued with a secret code then SMS the code to the recipient, who withdraws the money from any dealer in Kenya using the secret code.

It is anticipaed that this will be low cost (rumoured at Ksh. 18 per transaction).

Life will definitely not be good for Posta and PostBank.

At the moment, enthusiasm for m-banking has outrun its implementation. For one thing, regulators break out in a cold sweat at the thought of all the overlapping issues involved. But there are success stories in other parts of Africa. Leading the way is the South Africa , with MTN Mobile Banking and Wizzit both entering their second year of operations.

These telecom companies aren't offering m-banking out of the kindness of their hearts. They like m-banking because it's a way for them to attract new customers by doing what they already do well—processing millions of tiny transactions. Banks aren't as interested, because they don't expect to profit from poor clients who won't be taking out a mortgage anytime soon. But the telecoms could start siphoning away bank customers who don't need all the bells and whistles.