The mobile money system M-Pesa developed in Kenya by Vodafone and the UK government, which transformed the banking and payment systems in Kenya, is coming to Europe, with Romania the first stop. M-Pesa - which takes its name for the Swahili for money - has brought financial services to millions of unbanked in Kenya.

M-Pesa - the system

Users of M-Pesa do not need to have a bank account, instead the mobile phone number is the account.

The M-Pesa system caters for the simplest mobile phones, using SMS  text messages, as figure shows:

Source & Copyright©2014 - Safaricom

One reason that M-Pesa has been so successful - 43% of Kenya’s GDP flows through M-Pesa, is because it caters for all mobile phones not just smartphones, as most of the unbanked do not have smartphones. However, that has not held M-Pesa back as it offers bill payment and collection as well  and payroll services as person-to-person payments. Standard Chartered provides a “Straight2Bank Mobile Wallet”, a payment service for corporate clients in Kenya, in partnership with Safaricom’s M-PESA wallets. Straight2Bank Mobile Wallet will allow clients to make payments to both banked and unbanked individuals through their M-PESA mobile wallet. 

Rollout of M-Pesa.

Over the last 12 months Vodafone has sought to emulate the success in other developing countries, bringing M-Pesa to Egypt, India, Lesotho and Mozambique. The service now claims nearly 17 million active users and 186,000 authorised agents.

In Europe Vodafone have been granted an e-money licence to offer financial services in Europe. They have launched M-Pesa in Romania where seven million Romanians who transact mainly in cash will be able to use M-Pesa's simple text messaging technology to transfer as little as one new Romanian leu up to 30,000 lei a day. 

As in Kenya, Vodafone Romania customers can also top up pre-pay airtime on a mobile device, pay utility bills, make a deposit and withdraw cash from participating agents, and purchase goods.

Vodafone have told the FT that M-Pesa could come to "one or two" more Eastern or Central European countries soon but that Western Europe is not currently in its plans.

Catering for the unbanked

For the unbanked, cash has always been the main system for paying and receiving payments. Simple SMS text based payments are the simplest way to replace with the unbanked many of whom will not have a smartphone for many, many years, if ever. The issue in the developed countries is that most service providers, e.g. Vodafone, are assuming that such non-smartphone systems won’t be needed. This could be a mistake, just because a person is ‘unbanked’ doesn’t automatically mean they have no money or income. 

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CTMfile take: Corporate treasurers in some businesses will need to ensure that there are effective payment and collection services for their unbanked as well as their banked customers.