Electromagnetic Savannah
Commentary on science, technology and economics in Nigeria and beyond

Tuesday, April 03, 2007

Money transfer by mobile phone

There's this news story on the BBC about a service in Kenya which allows subscribers to transfer money by mobile phone. The company running the service, Safaricom, is based in Kenya and they say that their service (M-Pesa) allows you to send money to someone else, even if they aren't a subscriber to the service. They say that it also functions as a kind of bank - at least, that's what I assume, since it allows you to deposit and withdraw sums. The service relies on agents who subscribers deposit and withdraw money from.

Apparently, the service only started a month ago, but I can imagine how dramatic a change in people's lives it must be making. It means that e-commerce (at least on a small scale) becomes a more viable option - set up your website and list your phone number for people to transfer money to. It also means that you don't have to risk life and limb carrying sums of money around when you can simply transfer it to your recipient. And since (according to the company) you need a PIN to send/receive cash, it means that there's no point in stealing someone's phone in order to steal their cash too. (There's the slight worry that would-be muggers will now turn their attentions to the agents, but hey - one problem at a time. :) )

I'm pretty sure that the technology is sound enough for the purpose it's being used for. The idea of mobile phones for money transfer isn't exactly new - they've been used in Japan as far back as 2004. However, I think the impact of mobile phones as a means of payment will be bigger in Africa because unlike in Japan, in most countries there aren't the same means of reliably and easily transferring sums of money electronically. So I hope that the success of M-Pesa gives other mobile service providers the confidence to move into this potentially lucrative market!

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