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Vodafone, Moneygram hook up to create mobe money MONSTER

Cheap cash transfers, no limit - except the operators' margins

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+Comment A deal struck between Vodafone and Moneygram has added 334,000 international agents from whom you can send money to Vodafone's M-Pesa.

This will allow migrant workers in around 200 countries to send funds home to the Democratic Republic of Congo, Egypt, Fiji, India, Kenya, Lesotho, Mozambique, South Africa and Tanzania.

There are around 16 million people using M-Pesa, a mobile phone-based money transfer service. Users in M-Pesa countries don't need an M-Pesa account to receive money from an M-Pesa user.

A Kenyan living in Luton can now send money, be that from a Moneygram shop, through the Moneygram website or with a mobile app, directly to the mobile phone of a relative in Kenya where it will arrive as a specially presented SMS. The recipient then takes the phone to a local M-Pesa agent – typically someone who sells pre-pay top-ups in the village – show him the text message and receive cash.

Vodafone has previously announced a partnership with Western Union which has over 80,000 agents feeding into M-Pesa. Combined with the Western Union and native M-Pesa agents, that's around half a million sources of cash movements.

There is no limit to the amount which can be sent but there is a limit on how much an M-Pesa account can hold. In Tanzania, for instance, there is a limit which equates to £1,875.

Vodafone has announced a series of apps so that users of Apple, Android and Windows 8 phones can send money from their pockets in the developed world to the Nokia 3310s their friends are using in the developing world. The apps don't seem to have appeared in any of the stores yet, though.

Comment

Mobile Money may be constantly just around the corner for the developed world. Yet in much of the developing world it is a major form of banking for the unbanked and revolutionises the lives of the poorest people.

M-Pesa is the world's most successful mobile money operation. Launched by Vodafone in Kenya as a Corporate Social Responsibility programme, it is the poster-child for the industry.

M-Pesa is at least five times bigger than the rest of the Kenyan banking industry put together, in terms of the number of accounts on the service. The mobile network operator-led model – as opposed to bank-led models – is seen by some as providing the best time-to-market, consumer acceptance and market penetration.

The whole mobile money world runs on solving the problems of cash in and cash out, so the deal between Vodafone and Moneygram will have a far-reaching effect on the M-Pesa ecosystem.

The lack of a limit on the size of transactions is interesting because it means that Moneygram, which takes the legal responsibility for money laundering or financing of terrorism, is no longer hiding behind legal requirements to justify its relatively high fees. At the time of writing Moneygram estimates that sending £100 to Kenya would attract a transfer fee of £4.90.

The typical cost of an in-country M-Pesa transfer is 50 cents. An international transfer - particularly one where an an agent has to be paid commission for handling the incoming cash - will cost more, but it needs to be remembered that Moneygram is making on the foreign exchange.

Arguably they have a moral commitment to keep their costs down for the very poorest people in the world, who pay much more for mobile broadband, SMSes and calls than people who live in areas where cellular networks are more developed.

Ultimately it is in Moneygram's interests to do this and to work with Vodafone, as mobile money in the developing world is now such a powerful market that excessive margins would undoubtedly attract a disruptive player. ®

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