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Western Union has announced a partnership with M-PESA, the popular Kenyan mobile cash-transfer service. This deal opens up Western Union’s huge money transfer network to the Safaricon-owned “mobile wallet” service. The parnership will allow customers in US, UK and other countries to transfer money to a Safaricom/M-Pesa user’s account and the receiver will receive an SMS message from M-PESA notifying them that the money is available in their account.

Kenyans living abroad can now send money to their relatives back home through Safaricom’s mobile money transfer service, M-Pesa.
This is after Safaricom and Western Union signed an agreement, which enables Kenyans living in 45 countries in the US, Asia, Europe and Africa to access the now world famous M-Pesa service.
Although they can send up to Sh35,000 per transaction, limits per day, per month or per year will depend on the country the money is sent from, following the link-up that is likely to give the NSE listed firm a head start in the increasingly competitive mobile telephony market.
“Through this partnership, our customers and their friends and families will benefit from affordable, faster and more convenient international remittances,” said Safaricom chief executive officer, Bob Collymore.
Mr David Yates, of Western Union, applauded the service as an impressive adoption of the mobile channel.
“Cash payout through M-Pesa is projected to go up from 23 per cent to 40 per cent, as the traditional cash payout will take the rest,” Mr Yates said.
The transaction is similar to a traditional cash-to-cash money transfer, except that the sender specifies the recipient’s mobile phone number at the time the funds are sent.

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According to Women & Mobile: A Global Opportunity (PDF), authored by Vital Wave Consulting and sponsored by the GSMA Development Fund and the Cherie Blair Foundation for Women, the 73% of women in Sub-Saharan Africa and South Asia who do not have a mobile phone represent $13 billion per year in incremental revenue for mobile telephony operators. Women are the face of growth for the mobile industry in the developing world - 66% of all new mobile subscribers will be women - and there is a huge untapped potential for business interests and for social impact.

But will mobile money be the killer app to drive mobile phone adoption by women?

This is the question we put to Brooke Partridge, CEO of Vital Wave Consulting and Menekse Gencer, founder of mPay Connect in our recent Technology Salon in San Francisco. (Sign up to be invited to future Salons). With their input, we came to several interesting conclusions around mobile money and women empowerment:

Mobile Money is Many Things

Terms like mobile money, mPayments, and M-PESA, get tossed around without any real understanding of the differences in systems and outcomes. To help our understanding of these concepts, mPay Connect made great presentations on mobile money, and we're going to steal one, key slide:

Mobile money is really mobile financial services, and like traditional financial services, has several parts - mobile payments where money is moved from one account to another, mobile microfinance where money is loaned and expected to be repaid, and mobile banking where money is kept as a safe repository of wealth.

As you can read in The Mobile Money Movement, mobile money has many benefits, from greater money security to more transparent transactions, but there are two key benefits that we focused on in the Salon.

1. Lowering transaction costs: mPay Connect research shows M-PESA saves 3 hours per day for every Kenyan subscriber in reduced shoe leather costs - the cost of walking money from place to place. If we multiply 3 hours per day, by 13.2 million subscribers, by 365 days, that's 14.4 BILLION hours saved per year. Add in the average wage per hour in Kenya, and the time savings start to make you gasp in savings shock.
2. Increasing business legitimacy: Each business that uses mobile money builds a history of financial activity that they can use for loans, factoring, and even inventory control. It also allows governments to license businesses as such and better estimate and collect taxes. In fact, mobile financial services usually are not creating financial services - many of these systems existed informally through local networks - mobile money is formalizing them and bringing them into the measurable economy.

While there isn't any objective research yet on mobile money directly impacting GDP, you can start to sense the change it brings to an economy.

Mobile Money Involves Many Actors

While we often think of M-PESA as the poster child of mobile money, there are other mobile money systems. Even in East Africa there are payment systems by Bharti Airtel, Orange, and MTN. G-Cash in the Philippines is even older and larger than M-PESA, and other players besides mobile line operators smell the mobile money to be made.

In India, banks and mobile telcos are joining forces, while in Bangladesh, BRAC and Grameen Phone have joined to create B-cash, which is promising to be network neutral - that is allow any payment using any mobile operator's system. Overall, there is real convergence - in both payment systems and in the industries that want to participate in them. Recently in Nigeria, 16 companies were given a provisional license to do mobile payments and banking: only 6 are linked to banks and only 1 to a mobile operator (MTN).

Today's model, where mobile phone companies dominate, is just a snapshot in time.

Mobile Money Isn't Targeted at Women... Yet

Even with all that excitement, we don't see handsets, subscriber plans, or even special services targeted at women in Africa like we do in Asia. Mobile operators in Africa say they are growing too fast to target women - they can barely keep up with their existing new customer influx, regardless of gender. While there is truth to that, there are also cultural issues.

In many patriarchal societies, men control the use and ownership of mobile phones. Mobile technology can be seen as a threat to traditional power dynamics and social norms. There are some hints of change - it is a security line for girls to go away to school as they can be checked on at any time. Especially around health, it's usage as a communications tool can be deemed critical for family well being..

Building on the examples in Examining the Intersections Between mHealth and Mobile Money, mPayments can be interesting way to free women for city life - imagine dowries paid in airtime vs. livestock or payroll and government benefits direct to handsets vs. husband's hands. Conditional cash now paid at hospital visits could be used as incentives for other positive behavior change, like family planning and career advancement.

Now make your own positive behavior change for career advancement - sign up to be invited to future Technology Salons - so you can participate in discussions like this first-hand.

As part of the Boston Review debate Can Technology End Poverty?, a forum on the role of information and communication technology in global development, Ignacio Mas presented the 4 reasons why Safaricom's M-PESA mPayments system succeeded where other ICT interventions have failed:

Why does M-PESA work in Kenya? Why hasn’t it followed into irrelevance the telecenters that Toyama observed? It’s not that there was no demand for telecenters. It is only in hindsight that successful interventions are deemed demand-driven, whereas any that fail may be tarred as supply-driven. There is no inherently greater demand for payment services than for information; people’s needs are diverse. And explaining to a previously unbanked person how to make payments from a mobile phone sounds about as tough as explaining to a poor farmer that with the right hocus pocus he can get the computer in the flashy new telecenter to tell him what disease is ailing his crop.

There are four keys to M-PESA’s flourishing. First, it is marketed for a use that everyone can relate to: sending money home. These three simple words target a need that is not only large (generating good volume and willingness to pay) but also immediate (generating a willingness to try). Second, it is available anywhere. Today customers can deposit and withdraw cash at any of 20,000 locations—that’s twenty times the number of bank branches in Kenya. Third, new customers are supported through the learning phase by a well-incentivized and supervised retail channel of independent, local shops that put a human face on the service. Fourth, Safaricom successfully leveraged its brand to create trust in the system.

Notice that none of these four factors are technology-related. Instead, they are functions of intelligent marketing, distribution, and branding. Most development projects fail because they do not adequately address these core business concerns. This failure of business logic, rather than inept project management or a lack of technical or operational skills, is the essence of the local capacity-building gap that Toyama bemoans.

Claire Alexandre, Senior Program Officer at the Bill & Melinda Gates Foundation, has a great post on CGAP about 10 things you thought you knew about M-PESA. Below are the first four, which I found the most interesting. Be sure to click over to the full list once you've read through these:

10 things you thought you knew about M-PESA

1 - You thought the funds held in M-PESA were held (and used) by Safaricom

The funds are deposited in several commercial banks, which are prudentially regulated in Kenya. In addition, the funds are held by a Trust and are therefore out of reach from Safaricom, which cannot access or use them. In the unfortunate event of Safaricom going bankrupt, the creditors of Safaricom would not have access to the M-PESA funds. This is a requirement from the Central Bank of Kenya which oversees M-PESA. The funds remain at all times the property of M-PESA users.

2 - You thought M-PESA created money outside the banking system

Any amount which goes through M-PESA is 100% backed by the pooled accounts held in commercial banks. In terms of monetary aggregates, the mobile money stored and moved by M-PESA customers is counted as part of M1.

3 - You thought M-PESA transactions were not monitored

Each and every transaction done on the M-PESA platform is electronic and can therefore be monitored by Safaricom, which runs its own bank-grade anti-money laundering system. Even a cash-in or a cash-out operation has an electronic leg and is captured by the system. The Central Bank of Kenya gets regular reports on M-PESA transactions, as it does from other payment service providers.

4 - You thought M-PESA’s success meant it is now a huge systemic risk

The accumulated balance of all the M-PESA accounts represents just 0.2% of bank deposits by value. M-PESA is far from exerting a systemic risk. In June 2010, M-PESA transactions amounted to about 70% of the volume of electronic transactions in the country but were only 2.3% in value. M-PESA’s success means there is a real need for small electronic transactions and storage of value. It was designed with limits on how much can be transacted (no more than 70,000Khs leaving the account daily) and stored (maximum account balance is 50,000Khs). Cash-in, cash-out and P2P transfers are limited to 35,000Khs per transaction.

Read the next 6....

This is the bombshell that Erik Hersman tweeted about Safaricom's mPayment system, M-Pesa. Read it and then stop to think a minute about what that means for Kenya:

If one company moves 20% of country's GDP, and that company is not even a bank, just want does that tell you about the rise of mobile phone operators in Africa? Here are three thoughts that leap out at me:

1. For the first time, telecommunications companies are now "too big to fail" - they are such a force in a country's economy, they are now of strategic interest to national governments.
2. With such success, mPayment innovation will be severely curtailed in other countries. Banks will demand to lead mobile payment processes - they'll not loose that much business again
3. mPayments are now a business requirement, too many potential customers use it for a company to ignore it as payment option.

But don't think that Safaricom is resting on its laurels even though it owns the mPayment space in Kenya. They're now launching M-Kesho, which enables M-Pesa customers to perform basic banking transactions like deposit and transfer savings via their handsets

With innovations like this, 20% of Kenya's GDP may even be a conservative estimate.