Summary:

Vodafone is stepping up its mobile payments business. The global operator has partnered with The Western Union Company to pilot its cross bo…

Vodafone is stepping up its mobile payments business. The global operator has partnered with The Western Union Company to pilot its cross border Mobile Money Transfer (MMT) service that lets customers send remittances between the UK and Kenya. Customers will be able to send money from Western Union locations in Reading, Berkshire directly to subscribers of Safaricom, the Kenyan operator in which Vodafone owns a 40 percent stake. Those receiving the money can either cash the money through a Safaricom agent, or forward it on to another mobile phone in Kenya.

The new scheme, which uses Western Union to process the transfers, builds on Safaricom’s SMS payment service M-Pesa (Swahili for cash), which allows the carrier’s subscribers to send money to other mobile phones in Kenya. In a country where not many people have bank accounts, but some 10 million have mobile phones, the service has been a success for the operator. It’s typically used by urban workers sending money home to their rural relatives. Instead of taking a two-hour bus ride to give them the money, they send the funds by phone. Their relatives collect the money at the small shops or gas stations that are part of the M-Pesa network. Since its March 2007 launch, M-Pesa has attracted over 4 million customers and has since expanded into Tanzania and Afghanistan. But domestic money transfers are a low-margin business for Vodafone (NYSE: VOD). According to the WSJ.com, Vodafone charges $0.18 for domestic transfers in Kenya, but will price international money transfers from the UK starting at £4.90 ($7.22) for up to £100 ($149) and £6.90 ($10.25) for larger transfers.

Western Union has also been eager to build up its mobile phone business in global remittances. The money transfer company processed $64 billion in cross-border remittances last year and has 365,000 agent locations in 200 countries. Western Union head of digital ventures Matt Dill said the company would be partnering with additional operators to offer international money transfers including Philippine operators Globe Telecom and Smart Communications, Egypt

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