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Cross-border M-Pesa transfer likely in 2015

Next year, it may be possible for M-Pesa users in Kenya to send money to other network mobile subscribers outside the country.

British firm Vodafone, which owns the intellectual property rights to M-Pesa, last week said it was seeking regulatory approval to launch cross-border money transfers in 2015.
Partnerships with money transfer firm Western Union have made it possible for M-Pesa users in Kenya to receive remittances from abroad on their mobile wallets.
Following a separate deal, M-Pesa users in Kenya will also be able to receive remittances sent via MoneyGram on their phones beginning August.
However, sending money abroad using M-Pesa is currently not possible, and neither are international M-Pesa-to-M-Pesa transactions.
Under the proposal, payments will be routed through a single international hub, where issues such as currency conversions will be dealt with before the monies are delivered.
It will also incorporate other remittance transfer services and could potentially make it possible for M-Pesa users to send money to people using mobile money platforms outside the Vodafone network.
“We are pursuing regulatory approval, the technology exists… we need to make sure that the protocols work properly and I would say that in 2015, you will start to see more M-Pesa-to-M-Pesa international transfers,” said Vodafone's director of Mobile Money, Michael Joseph.
M-Pesa was first launched in Kenya in 2007 by Safaricom, a company in which Vodafone has a 40 per cent stake. With its success in Kenya, Vodafone has since expanded the mobile money platform to other countries.
Currently, M-Pesa is used in at least nine countries other than Kenya, including Tanzania, South Africa, India, Lesotho and the Democratic Republic of Congo.
Early this year, Vodafone forayed into Europe by launching M-Pesa services in Romania.
Research carried out by the GSM Association last year found that a growing number of operators running mobile money platforms were eager to tap into the international remittance business.
“It is a business opportunity that many network operators are keen to explore, especially those with a live domestic mobile money service,” read the report.
In East Africa, Tigo, a unit of Millicom Cellular, has launched cross-border mobile money transfer.
In February, the company brought to market a service that made it possible for Tanzanians and Rwandese to send money to each other, automatically converting currencies in the process.
The competitiveness of these cross-border mobile money services will depend on their ability to beat the prices offered by traditional money transfer firms.
According to the World Bank, African migrants sent about $60 billion (Sh5.16 trillion) back home in 2012. Globally, the remittance market is expected to hit the Sh50 trillion mark this year.
However, transfer costs are proving to be a major hindrance. The World Bank says that Africa is the most expensive market to send remittances to, with average costs of 12.4 per cent the value of a transaction.
“We need to make sure customers pay the lowest possible price,” said Mr Joseph.
Currently, Vodafone has concentrated on rolling out its mobile money platform in markets that are heavy cash users, many of them in the developing world. 
On the other hand, remittance traffic to Africa is mostly from Western Europe and North America, relatively cash-lite economies that do not necessarily need M-Pesa services.
However, Mr Joseph argues that there may be a need for an M-Pesa type product targeted at migrant communities.
In Kenya, M-Pesa is facing a rapidly changing market and regulatory framework that may affect its competitiveness in the future, with the government calling for sharing of mobile money agent networks among operators in the country.
Safaricom accounts for about 81,025 agents. Communications Commission of Kenya (CCK) statistics indicate that as of December 2013, there were 93,689 mobile money agents in Kenya.
Equity Bank, East Africa’s largest financial institution by customer base, is also set to make its debut in the telecommunication market.
Mr Joseph acknowledges that Equity Bank has the potential to pose a challenge to M-Pesa since it “understands the bottom of the pyramid,” but he argues that “there is room for more players” in the business.
In early 2015, the relationship between Safaricom and Vodafone regarding M-Pesa is set to shift. A new M-Pesa platform, hosted in Kenya, is expected to go live.
Currently, the M-Pesa platform is hosted in Germany and Safaricom pays Vodafone to manage it.
Once the new platform goes live, Safaricom will only pay Vodafone license fees for the intellectual property rights to M-Pesa.

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