Cell phones have evolved from being simple voice transmitters to
productivity tools and entertainment devices. Now, as several new services
illustrate, they are poised to replace international wire transfers and
banks cards as well.
U.K. based mobile communications carrier Vodaphone (Quote) is
launching M-PESA, a new service that allows Kenyans to send money to family
members using their cell phones. Vodaphone will begin testing M-PESA as an
international service between the U.K. and Kenya in April, and expects to
expand it to other international markets, including Eastern Europe.
Currently, customers of Safaricom, Vodaphone’s carrier partner in Kenya, can
register at any authorized M-PESA agent, put money into their account,
provide a security question and then send a text message to a friend or
family member. The recipient gets a PIN number and a message telling them to
go to a Safaricom agent, where they can pick up their money. Only the sender
needs to be a Safaricom customer.
Vodaphone spokesman Mark Pursey said that another use emerged for this
service during trials, which is businesspeople loading up their accounts
with money before taking the bus to the capital city of Nairobi and then
getting the cash upon arrival, in order to avoid carrying cash on the bus.
“This is not a use we particularly envisioned,” Pursey told
But the real opportunity for Vodaphone is in international transactions.
Pursey said that according to the World Bank, migrant workers sent $250
billion home to their families. “The real competitive advantage is in
international remittances,” he said.
The M-PESA service is “very competitively priced compared to other
remittance services, and more affordable to send smaller amounts rather than
larger amounts only every-so-often,” said Pursey.
Given that the U.K. is home to over 1 million migrant workers from Poland
and Lithuania, Vodaphone is likely to expand into those markets soon, Pursey
At the same time, a service launched in Belgium will allow cell phone users
to pay merchants and other service providers (like babysitters) as if they
were using their bank cards.
The system was developed by the Brussels-based payment systems vendor
Banksys and rolled out in collaboration with the three Belgian wireless
carriers, Base, Mobistar and Proximus. The service requires users to have
cell phones equipped with SIM cards containing Banksys’ banxafe encryption
According to Jean-Michel Dasnoy, a spokesman for Banksys, the system allows
consumers to use their cell phones for the same kinds of purchases as they
would pay for using a bank card. The service is particularly attractive for
mobile merchants who don’t want to carry around a point-of-sale terminal.
The system should also appeal to high-end retailers with low volumes because
they can avoid paying the plethora of network and other fees associated with
debit card transactions.
The system has been in place since April 2006, when the carriers began
rolling out the newly minted SIM cards, allowing customers to check their
bank balances and to pay their cell phone bills. “We’ve had more than 6.5
million transactions just testing the system,” Dasnoy told
As with Vodaphone, Banksys has its eyes on foreign markets. “We’re ready and
keen to deploy this system with other carriers,” he said. “Everybody has
been impressed that you can see mobile payments with a cell phone.”