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“Mobile payment" invented in Kenya sets out to conquer Europe

Aug 22, 2014

AFP - Africans have long depended on technologies that have developed abroad. But a now a Kenyan system of money transfer using mobile phones that has revolutionized the lives of millions of people in the East African country is now set to conquer Europe.

M-Pesa (“M" Mobile, "Pesa" means "money" in Swahili), which, via a simple mobile phone, allows users to send and receive money and pay for goods and services, is now expanding into Romania. "From East Africa to Eastern Europe, that’s quiet phenomenal when you think about it," Michael Joseph, who heads Vodafone’s Mobile Money business, told AFP in Nairobi.

Image AFP

The British phone giant is the largest shareholder (a 40% stake) of Safaricom, Kenya's biggest mobile operator, and participated in the design and launch of M-Pesa in Kenya in 2007.

"I think that this is something the rest of the world can look at, to say that there are ideas that can emanate out of the developing world, and take it to the developed world,” added Joseph.

Since its launch, the service has grown exponentially, with about 30 billion euros flowing through the service in Kenya alone, where it is now an integral part of everyday life for many people.

M-Pesa has about 18 million customers - out of a population of about 25 million over 15 years old - and sees eight million transactions conducted every day, bypassing the banking system in a country where a significant part of the population does not have bank accounts.

The application, which is available for the simplest mobile phones, allows users to pay utility bills, pay for food at a restaurant, buy a drink in a bar, pay for a taxi, and to send money to friends and family.

The minimum sum is only 8 euro cents. The maximum is 600 euros and M-Pesa authorizes a maximum of 1,200 euros of transactions per day.

The recipient of a transfer can keep the money in her M-Pesa account and then use it in turn to pay for a good or service, or she can take out the sum in cash at one of the many agencies throughout the country, with just a phone and an ID.

At these agencies - found in the form of small shops or kiosks - it’s also possible to deposit money in an M-Pesa account. The large number of agencies throughout the country is one of its keys to success.

Some businesses and supermarkets will also hand out cash in exchange for the transmission of the corresponding amount by M-Pesa.

A “savings” version has also been launched, allowing Kenyans who do not have access to the banking system to earn interest on their M-Pesa account.

The system has since been exported elsewhere in Africa - in neighboring Tanzania, South Africa, Egypt, Lesotho, Mozambique, the Democratic Republic of Congo - as well as in India and Fiji. According to Vodafone, more than 1.2 billion dollars are traded via M-Pesa each month worldwide.

Last March, M-Pesa was launched for the first time in a European country, Romania, where thousands of distribution points are already open across the country, and are supposed to triple by the end of the year.

Michi Carstoiu has just activated his account at a retailer in Bucharest. He said that M-Pesa is an ideal complement to online banking. “Most importantly, I save time - plus I think the transaction fees are smaller,” the engineer told AFP.

"Everyone has a mobile phone, and it is very simple to send and receive money or make payments," he added.

According to Michael Joseph, Romania was chosen as a European launch pad because many Romanians still dependent on cash.

“The majority of people in Romania have at least one mobile device, but more than a third of the population have no access to conventional banking," he said.

Vodafone estimates the number of potential customers at seven million and expects 300,000 by 2014. Romanians will be able to carry out up to 9,000 dollars in transactions daily.

Yet addressing Western markets poses new challenges: regulations - including those for banking - are different and consumers already have access to a variety of financial services, including those online.

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