A Central Bank of Kenya report has shown that mobile phone based transactions across all networks reached $5bn in the first 3 months of 2013. This was an increase of $0.76bn on the same period last year. The CBK said Kenyans made the most transactions in January, when transactions were worth $1.69 billion. In February, the value dropped marginally to $1.68 billion. This fell again at the end of the quarter to $1.6 billion in March. This month on month drop does not reflect what happened in the same period last year, when the value increased month on month significantly.
This drop in value is a slight concern and coincided with M-PESA‘s increase in charges because of the government’s introduction of a tax on mobile money transfer.
What is mobile banking?
Safaricom launched the mobile banking M-PESA service in 2007 and its simple premise is to allow people to transfer money and pay bills who don’t have access to traditional financial institutions. Its success and uptake has been revolutionary in Kenya and the M-PESA service has since launched in other parts of Africa and India. Many Kenyans live and work in big cities like Mombasa or Nairobi and send money home through their mobile devices to families living in rural areas. The system is quick and easy and, crucially, M-PESA has gained the trust of millions of Kenyans with an estimated 17 million Kenyans using mobile banking in what is currently the world’s hotbed for mobile money. As one of many unexpected consequences of the service, mobile money was also credited for easing tensions in Kenya after the post-election violence in 2008 by allowing people to receive money when trapped hiding out in slums.
With mobile banking there is no need for a smartphone or an updated handset which is essential on a continent where the basic feature phone is still very much the phone of choice. Customers hand cash over to a mobile money agent, their mobile account is then credited, and can then send mobile money to a recipient who then cashes it in at another agent through a secret code. Commission is then paid to the agent. However this fee compares favourably to bank fees. The reduced costs coupled with the exponential uptake of mobile devices in Africa and the ease with which you can begin begin mobile banking have been the major reasons for its success.
However does the increase in mobile banking in Kenya tell the whole story? What should we take from the fact that the overall value of transactions fell month on month in the first quarter? What else needs to be done to improve access for the unbanked?
According to a new report from the International Telecomms Union (ITU) the number of mobile phone subscriptions is expected to pass seven billion by early 2013, surpassing the world’s population of 7.1 billion soon after. In Africa, despite the exponential uptake of mobile phones over the last decade, the continent still lags behind in terms of number of subscriptions per head. The poor and those in rural areas are often the ones lacking mobile devices and subsequently excluded from the mobile banking system. Governments need to do more to encourage the uptake of mobile devices or subsidise contracts for the poor to ensure everyone benefits.
Questions around trust in using a mobile device for the transfer of money still remain. Just as in the UK there probably needs to be a UK-wide advertising campaign to persuade people of the security around mobile payments and NFC, so do African governments need to reassure the population around the security of mobile transfers.
People also need to be persuaded of the benefits of mobile banking. What can mobile banking bring to a market trader in rural Kenya who has been using cash all her life?
Despite the success of Kenya’s M-PESA, more needs to be done to ensure the poor are not left behind and the gap between rich and poor is not widened. The premise of mobile banking is to reach those who had previously been unreachable, particularly those in rural areas, and its uptake needs to be stimulated by governments, NGOs and mobile operators.
- The success of Kenya’s M-PESA – a short video (mobileinthedevelopingworld.wordpress.com)
- Why does Kenya lead the world in mobile money? (economist.com)
- Q1 mobile money transactions reach $5bn in Kenya (mobile-ent.biz)
- Democratic Republic of Congo – Mobile Banking on the up (mobileinthedevelopingworld.wordpress.com)