Kenya's M-Pesa mobile money app launches in Romania

East European country is the first territory in Europe to get the mobile cash transfer technology, which also launched in India last year

Author: Tom Bowker

Source: Central Banking | Apr 2014

Categories: Financial market infrastructure

Topics: Mobile banking, Romania

 

The mobile money transfer system M-Pesa this week entered its first European market with a launch in Romania, aiming to serve seven million Romanians who today transact mainly in cash, according to Vodafone, the telecoms company behind the technology.

M-Pesa is based on simple text messaging technology and operates over any of Vodafone Romania's mobile network connections. Romanian M-Pesa customers will be able to transfer anything between one new Romanian leu ($0.31 cents) and 30,000 lei ($9,262) per day.

The system was first launched by Vodafone and local operator Safaricom in Kenya in 2007, where it retains by far its deepest penetration – and has since been introduced in other African countries and last year in India, in partnership with ICICI Bank.

It is aimed particularly at unbanked people, which describes a significant proportion of Romanians, according to Vodafone. Michael Joseph, Vodafone's director of mobile money and former chief executive of Safaricom, said: "The majority of people in Romania have at least one mobile device, but more than one third of the population do not have access to conventional banking."

As well as cash transfers, M-Pesa also will allow Romanians to pay utility bills, make a deposit and withdraw cash at participating agents and purchase low-value goods such as a newspaper or a coffee.

Michael Klein, professor of development policy at the Frankfurt School of Finance & Management and a former World Bank vice-president for financial and private sector development, told CentralBanking.comthat it was a "mild surprise" that M-Pesa has launched in a European country, but said that a country like Romania was the right choice, thanks to the number of emigrants who are likely to want to send money home to relatives.

Globally, M-Pesa had approximately 16.8 million active customers as at December 31, 2013, and its customers make more than €900 million worth of person-to-person transactions per month. In Kenya, Safaricom and Vodafone launched a savings and loans product in November 2012, called M-Shwari, in partnership with the Commercial Bank of Africa.

Klein said Michael Joseph's recruitment to head up Vodafone's mobile money business worldwide displayed an ambition to roll out M-Pesa "more systematically with the original godfather [Joseph] in charge", as other attempts to make it stick outside Kenya have met with mixed success.

"Neighbouring Tanzania developed quite impressively but not as impressive as Kenya," Klein said, adding that "no one really understands so far why that is". In India, where M-Pesa launched last year, there are "tons of people", Klein said, "but at the same time banking regulations are quite restrictive". "That can put fairly burdensome restrictions on mobile money relative to what the Kenyans have done. So we will see – this is all experimental stuff," he added.

The Romanian central bank did not return a request for comment on the launch of M-Pesa in the country. Klein said that so long as it is run as a so-called ‘narrow banking' system, whereby cash is simply turned into mobile credit at one end, and back into cash at the other, there are limited financial stability risks.

What is more, it should not be too disruptive to existing payment infrastructures. "The authorities may see this as improving access rather than a challenge to the existing systems," he said.