Vodafone is at the centre of a financial services revolution in Africa. Its one that relies on a simple Pay-as-you-go model that allows registered users to send and receive cash via their existing mobile phones.
Vodafone Money Transfer has been launched under the brand name M-PESA in Kenya and has revolutionised the business of money transfer in a country where a traditional banking infrastructure does not exist in remote areas, and the only lines of communication are mobile phone networks and the local stores that exist to buy credit for them.
Vodafone saw a huge opportunity to provide a much-needed service to individuals scattered throughout the country. Many of the men work in the cities where jobs are available, but always have the problem of getting cash back to their loved ones in remote villages. The key to success was the mobile phone and an existing network operated by Safaricom. The problem was how to achieve simplicity for the end user, with the addition of the necessary security for any service involving money.
The M-PESA business was developed in conjunction with the DFID (Department for International Development) to make finance more accessible in developing countries. Its a business based on very high volumes of low-value transactions, which enables money transfer via SMS and does not require a traditional bank account. The system is based on a Pay-as-you-go model that involves no joining fee, no monthly charges or minimum balance and is available to anyone.
According to Vodafone, M-PESA has proved a fantastic success in Kenya from day one. Users are able to transfer money, pay for items in stores, pay bills and pay-in and withdraw cash at registered agent outlets. These main agents are Safaricom airtime dealers, petrol stations, supermarkets, local shops and postal services all offering basic cash handling services to M-PESA users.
The M-PESA application is hosted by Rackspace and interacts with the Safaricom system in Kenya. Vodafone operates a vast record management system, which maintains real-time records of every transaction and the whereabouts of every item of money. This is critical to the success of the system, as each user has to trust that their transaction will be handled securely and efficiently. In addition Vodafone had to ensure compliance with money launderinglaws, while at the same time taking , but also take into account the inability of some customers to provide ID other than the recognition of their status by a village elder.
One of the key reasons behind the success of M-PESA is that the users have come to trust that its always available. As a result, the need to send envelopes of cash via the local bus driver, (which is apparently, surprisingly secure) is no longer the most popular money transfer choice.
Kenyas Largest Financial Service, M-PESA is now the most popular mobile money transfer and payment service in Kenya, moving billions of shillings annually, and is growing rapidly. Plans are underway to introduce the system to other countries where the traditional banking infrastructure is low and mobile phone penetration is high.
Rackspace is a key factor in the success of the project. It is essential to have guaranteed network uptime, 24/7/365 support and total security, as well as massive flexibility to react to unbelievable growth in a very new and exciting business.
Some of the challenges faced by the Vodafone team were considerable. At Christmas and Easter periods, individual transfers headed towards 2.6 million per day. And these were all small transactions, but vital to the individuals sending and receiving the money, so nothing could go wrong and the whereabouts of the cash had to be known at any given second of the day.
Rackspace provides a team of dedicated account managers and support technicians whose expertise and dedication has been invaluable in bringing Vodafone Money Transfer to market, says Vodafone Service Delivery Manager, Neil Dwyer.