C&B Notes

A Faster Way to Send Money?

Mobile, wireless technology has promoted an alternative to traditional banking in many places on the African continent. Carriers are further advancing the capabilities of their payment and transfer systems by allowing cross-border transactions, which further disintermediates banks and governments.

Africa’s biggest telecommunications companies are striking deals allowing their customers to make payments across networks and borders, the latest stride in the continent’s ascent as a leader in mobile financial technology.  Starting this month, London-based Vodafone Group PLC and South Africa’s MTN Group Ltd. plan to allow customers in East and Central Africa to send each other money, the first time Africa’s biggest telecoms have cooperated in the competitive mobile payment space.  Their new partnership could spur even more economic growth in these fast-growing markets, and drum up revenue for mobile companies in countries where demand for new cellphones and airtime has matured.  Fierce competition is one reason MTN lost revenue per user in 19 of its 22 markets in the first quarter, MTN said…The telecoms also hope that their partnership will give them a bigger slice of the $48 billion the World Bank estimates that Africans sent and received as remittances during 2014.

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One hurdle has been getting central bank approval in each market to send and receive money from abroad, said Serigne Dioum, MTN’s head of mobile financial services.  As of May, MTN had approval to receive money in Uganda, as well as to send and receive money in Rwanda. Vodafone declined to comment.  Mr. Dioum said MTN and Vodafone sought to pair countries where MTN was stronger with countries where Vodafone’s subsidiaries dominate, creating broader regional reach for both companies. East Africa, he said, “is where our mobile money offers have more penetration and it is where mobile money is working well.”  Mr. Dioum said the partnership will cut fees for cross-border transfers from up to 20% of a transaction’s value to 3% or less, something MTN achieved in a pilot partnership launched with Airtel Burkina Faso last year between Burkina Faso and neighboring Ivory Coast.  The World Bank says reducing such fees by just five percentage points would save Africans $16 billion a year. That’s money customers might channel toward more mobile purchases, operators say.

“We want people to use their [mobile] wallet to perform every single transaction, including international money transfers,” Mr. Dioum said.  Last year, Ugandans sent $72 million in remittances to Kenya, according to data from the World Bank.  Kenyans sent Ugandans $51 million. Vodafone said it already has seen the benefits of interoperability following a February deal for its 7 million M-Pesa customers in Tanzania to transact with the 4 million Tanzanian customers of rival Tigo, a subsidiary of Millicom International Cellular SA.  “The more people playing in the ecosystem, the better it is for everyone,” said Greg Reeve, Millicom’s head of mobile financial services.  With the signing of that deal, which followed a different agreement between Tigo and two other Tanzanian carriers last year, Tanzania has become the most interoperable market in Africa.