By Patrick Kagenda
As Zain (U) last week launched its Zap Mobile Commerce, a mobile phone based money transfer servicein Uganda in partnership with Standard Chartered Bank, in neighbouring Kenya Safaricom was launchinga similar service, Hello Money in partnership with Barclays Bank (K) Ltd.
In Uganda, Standard Chartered Bank becomes the second bank to partner with a mobile telephony company to provide mobile-banking after Stanbic bank partnered with MTN to offer almost similar services two months ago. In Kenya, where the mobile banking business has existed for the last two years, banks like Equity Bank, Standard Chartered Bank, KCB Bank, Post Bank and Consolidated Bank have partnered with phone service providers.
The mobile banking solutions rolled out operate more like SMS banking services. At the Zap launch, Standard Chartered Bank Managing Director Lamin Manjang told journalists that the new service will give customers the convenience of accessing banking services in the palm of their hands through their mobile phones.
However, as more banks roll out services that hinge on mobile telephony technology and open partnership models allowing banks and mobile carriers to connect to each other on common platforms, regulatory issues remain a key challenge.
Partnerships between banks and mobile carriers mean that both players are into a contractual agreement. However the biggest gainer here could be the banks.
Banks appear to require very minor upgrades on their systems to transact in mobile money while the telecoms companies have to invest heavily in their infrastructure. The second benefit to the banks is that the telephony companies will do the work of bringing on board the unbanked clients who the commercial banks have been reluctant to approach in spite of the stifling competition in the banking sector.
As competition in the mobile telecommunications services market in Uganda gets stiffer following the confirmation of the entry of Essar Teleholdings of India, telecoms companies could be looking for banks to partner with to remain afloat. The Indian telecommunications company will become the sixth mobile telephone operator after Zain, MTN, Utl, Warid, and Orange.
However analysts argue that such exclusive bank-mobile relationships still fall short of reaching the greatest number of clients compared to an open federation where all banks and mobile service providers share one platform. In Kenya where mobile banking started two years ago and has since taken root, an increasing number of small businesses have embraced the services offered by mobile money transfer products such as Safaricom’s M-Pesa and Zain’s Zap, prefer to trade using virtual money, with the operators providing the safety associated with banking.
Researchers say that by the year 2013, over half a billion subscribers in the world will use their phones for mobile-commerce. Mobile money could become a mode of payment for everything. Traders experienced with the mobile money are upbeat about the services that allow them to carry a lot of money while feeling secure, pay and receive money instantly at the money agents. In Kenya, six million people are said to be using the M-Pesa service to transfer over KShs 17 billion every month, and that mobile money is taking on more prominence for the small trader, who see the product as a means to improve their business processes.
The mobile money systems are considered foul proof considering that even the unscrupulous businesspeople who have always delayed transactions and issuing bouncing cheques have no room because one can only transfer or withdraw what they own and what they have deposited with the money agents.
But with the never ending network failure associated with some of the mobile telephony service providers in Uganda, the success of the mobile money will depend on how fast the companies upgrade their systems. The phone is rising to become the mobile bank.
The banks hope to use the mobile money service to attract small traders who require micro-finance products such as loans to build their businesses as
based on figures from the mobile world analysts, who said Uganda closed last year with around 8.5 million subscribers. With Uganda’s only 3 million banked account holders, the mobile phone could reshape the banking industry.