Gadget crazy? Then you've probably, at some point, sent relatives pictures or text messages via your cell phone.
A man sends money through the M-Pesa mobile phone service in Nairobi, Kenya, last April.
Would you do the same with money, though? The idea might give you pause, but from Miami to Manila to Mombasa, people are already sending cash to loved ones through their mobiles.
These are early days still, but mobile money transfers could eventually mean big business, even if it captures just a sliver of the global remittances business -- which the World Bank expects to reach $318 billion this year. Research firm Informa, meanwhile, estimates that globally there are now more than 3.3 billion mobile subscriptions. And both figures are set to rise.
So far, mobile-based remittances have caught on in places where banking services are hard to come by.
For instance, a service called M-Pesa, launched by mobile operator Safaricom in February, allows for money transfer via SMS within Kenya. If a worker in Mombasa needs to get $3 to his rural relatives, he can text it instead of riding two hours on a bus to hand it over. His relatives can collect the money by bringing their phone to any small shop or petrol station that acts as an M-Pesa agent (there are already hundreds around the country).
The process for using M-Pesa is simple, and the requirements are basic (see www.safaricom.co.ke/m-pesa). A PIN is involved, and a national ID card serves for identification. But neither a bank account nor a home address are needed -- important when users might lack both.
It's unlikely that such a service would have taken off in Europe or the United States, where banking alternatives are already in place. But combine a rarity of banking services with the growing prevalence of cell phones and, "much to the surprise of those focused only on developed markets, Africa is leap-frogging ahead of Europe in the area of micropayments," says Tim Jones, principal at innovation consultancy Innovaro in London.
The main partners behind M-Pesa are Vodafone (an investor in Safaricom) and Citigroup. M-Pesa will be rolled out to various international locations, and it's already available between the United Kingdom and Kenya, meaning a Kenyan expat in London can text $3 to rural relatives back home.
For consumers, using M-Pesa beats visiting a Western Union branch on three counts, says Jones: the transaction fees are far less, there's no need to wait in huge lines, and the receiver knows instantly that the money has arrived.
But Western Union is eyeing mobile-based transfer, as well. It's by far the dominant player in global remittances, operating in 200-plus countries and tallying $4.5 billion in revenue last year.
Earlier this year it started up a new mobile division, which in October announced an agreement with the GSM Association (representing 700-plus operators) to develop a commercial and technical framework for mobile-based global remittances. So far, some 35 operators are participating in the project, and services based on the framework are expected by the second quarter of next year.
Western Union's value proposition to a local operator: Rather than sign 200 bilateral agreements to offer remittances in 200 different markets, "connect into our global network, and we will allow that local service to become a global service," says Matt Dill, general manager of Western Union Mobile.
A Western Union mobile wallet application is already found on phones sold by operator Trumpet Mobile at Radio Shack stores in some U.S. cities. Using the application and a cash card account, customers can send money through the Western Union system from their mobiles. The service, a sort of test run for Western Union, targets those sending money to Latin America and the Caribbean.
In the end, though, remittances might be just one feature in a broad array of mobile-based financial services that are particularly suited for the developing world, notes Mark Pickens, a microfinance analyst at the Washington, D.C.-based Consultative Group to Assist the Poor.
Banks have traditionally struggled to find a profitable business model in impoverished areas, where the cost of operating a branch office usually outweighs whatever profits it can achieve. Yet there's increasing evidence, notes Pickens, that the availability of financial services correlates strongly with economic growth and poverty alleviation.
The cell phone is important because it can offer bank-like services without the need for expensive branch offices. A mobile wallet can become, in essence, a virtual bank account for the unbanked. Salaries or government benefits might be deposited directly into mobile wallets, where they could be stored until needed for withdrawal or transfer.
Mobile-based financial services "could lead to a fundamental shift in what we're calling the 'access frontier' for low-income people looking to get banking services," says Pickens. This would allow them to "manage their affairs better and put a safety net under their family, maybe build assets for the future, and possibly even start new businesses and grow their income."
And, of course, it would make the phone much more than just a gadget. E-mail to a friend
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