With their superior national coverage and large subscriber bases, Africa’s mobile network operators have built up a level of market power to the extent that they have been called ‘the new incumbents.’ Newly introduced converged licensing regimes have increased the competitive pressure in a number of key markets but also allow the mobile operators to branch out into new service segments.
Due to Africa’s poor fixed-line infrastructure, the mobile networks are beginning to play an increasing role in Internet service provision. Mobile banking is an emerging key trend that is revolutionising Africa’s financial sector, where only a small percentage of the population has access to traditional bank accounts.
More than 10% of Kenya’s GDP now pass through the M-Pesa mobile banking service, which has more users than there are bank account holders in the country.
Safaricom started testing a banking service in 2005, enabling users who do not have bank accounts to build up credit on their mobile phones and then pay bills via SMS. The company applied for a banking licence in 2006 and launched a mobile payment service called M-Pesa in March 2007, allowing customers to transfer money, deposit or withdraw funds using their mobile phones. The service would use Safaricom’s airtime distribution outlets and other authorised agents. It does not require the user to have a bank account, nor is there a minimum amount. Users can deposit cash into the M-Pesa account and withdraw it through a network of authorised dealers such as shops and petrol stations, or at one of 110 PesaPoint ATMs in 46 towns throughout Kenya, without the use of an ATM card. SMS-based money transfers can be made irrespective of whether the recipient is another M-Pesa customer or not, and even to non-Safaricom customers.
M-Pesa attracted 1.6 million users within 12 months and broke the 3 million barrier in 2008, roughly the number of all account holders at all Kenyan banks combined. By this time it was carrying US$280 million per month, the equivalent of more than 10% of Kenya’s GDP. Safaricom earns between US$0.35 and US$0.50 per transaction.
M-Pesa’s stunning success in Kenya has prompted Safaricom’s parent company, Vodafone, to expand the service internationally, starting with Tanzania in April 2008.
The extensive national coverage of the mobile networks has the potential to revolutionise the financial services sector in Kenya where less than 10% of the population have a bank account and services outside the major cities are limited. However, the established banks are complaining that the mobile operators are enjoying privileges similar to those extended to them but not being subjected to the same regulatory regime.
IRR’s Mobile Banking & Financial Services Africa event running in Johannesburg from July 20 will examine how mobile operators, banks, microfinance institutions, payment specialists and solutions vendors are developing and launching enticing products and services for a variety of market environments and customer segments.
For event information see –
For BuddeComm research see – 2008 African – Mobile Communications and Mobile Data Markets
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