Vodafone and Western Union to Partner on Money Transfers

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Vodafone has joined forces with Western Union on an international mobile money transfer pilot; residents in the U.K. town of Reading will be able to send money to the mobile phones of relatives and friends in Kenya.

Money transfers has already become a success in Kenya via the M-PESA ("M" for "mobile" and "Pesa," the Swahili word for "money") system, which, for example, can be used by someone in an urban area to forward money to relatives in rural areas, and people in rural areas can pay off a loan in an urban area.

The service is marketed by Safaricom, in which Vodafone holds a stake, and there are currently around 4 million M-PESA customers, and that number is growing by approximately 200,000 users a month, according to Caroline Dewing, a spokeswoman at Vodafone.

"What we are doing is extending M-PESA internationally, and we are partnering with Western Union to do this, because they have such a huge foot print in terms of stores and knowledge in the space of international remittances," Dewing said.

A person who wants to transfer money will be able to go into a Western Union store in Reading and say that they want to transfer some money to a Safaricom cell phone in Kenya. For the receiver in Kenya it will work just like any M-PESA transfer.

"They'll get a text message saying you have been given X amount of money, and they can then choose how to store that: money on the phone, send it on to someone else or go to an M-PESA agent and cash it," Dewing said.

Convenience and the ability to send smaller amounts for a low fee are the two major benefits compared to traditional money transfers. Sending up to £100 costs £4.90 (US$7.35), and £100 to £200 is £6.90, according to Dewing.

The trial will be conducted for three to four months. During those Vodafone will test all elements of the service and also see if the fee structure works, according to Dewing.

The goal is to roll it out between the U.K and Kenya, and then on to other markets within the near future, said Dewing, who declined to be more specific.

Using the mobile for either money transfers or as an electronic wallet is getting a lot of attention from the financial and telecom sectors.

Western Union is, for example, already working with Orascom Telecom, Globe Telecom and SMART Communications.

Last month, phone manufacturers were urged to include NFC (Near Field Communications) functionality in mobile handsets in order to speed adoption of mobile payment systems by the GSM Association, which is also involved with Western Union.

Payment card companies are also getting on board. In October, MasterCard announced PayPass, an over-the-air provisioning service.

In September, Visa announced it was working with Nokia on payment-related services and applications using the Android platform.

Vodafone currently sees opportunity in the mobile money transfer market, simply because there isn't a traditional banking infrastructure in place in countries like Kenya, and in the developed world "we have credit cards coming out of our ears," according to Dewing.

The push from operators and phone vendors is about making people even more dependent on the phone, according to Richard Webb, directing analyst at Infonetics Research.

"It continues the trend of adding more application and functionality to the phone. Making the mobile phone the single device you never leave home without, along with your door keys, and that might come to a mobile phone as well with biometric fingerprinting or something like that in the future," said Webb.

Challenges include getting people to trust the services and getting the retail sector on board, but Webb expects both to fall into place eventually.

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