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Summary:

M-Pesa, the mobile money system used to handle nearly half of Kenya’s gross domestic product, is tentatively stepping into eastern Europe.

Mobile Money
photo: mobiletor

Vodafone has launched M-Pesa in Romania, marking the first time the widely used mobile money system has made it across to Europe.

M-Pesa has almost 17 million users around the world, but there’s a good chance you’ve never heard of it. It’s been around for around seven years in Kenya, and from there it’s spread to Tanzania, South Africa, India and Afghanistan. In all of these developing markets there are millions of people who lack formal bank accounts but do have mobile phones, and M-Pesa lets them use their handsets to make and receive payments.

In other words, while carriers and other players are still trying to get the idea of the mobile wallet up and running in the western world, that revolution has already taken place elsewhere. It may be less pretty than a fancy smartphone app, being largely based on SMS, but in Kenya, where Safaricom (part-owned by Vodafone) first launched M-Pesa, it is now the conduit for 43 percent of gross domestic product.

Banking without banks

In Romania, people can use M-Pesa to send amounts as low as one new Romanian leu ($0.31) or as much as 30,000 lei ($9,257) per day. What’s more, a Vodafone spokesman told me on Monday that the carrier would be looking into enabling international remittances to Romanian M-Pesa accounts, as is already possible in other markets.

Here are Vodafone’s charges for using the system in Romania:

MPesa Romania tariffs

Romania has many unbanked people, particularly in rural districts, so the system gives them a handy and fairly cheap alternative to cash. Vodafone’s spokesman told me the carrier is evaluating other countries in the region, and said any further rollout would be “likely to be somewhere with a similar financial infrastructure.”

If this stuff is priced right, to my mind it undermines many of the key arguments for using Bitcoin as a currency in the developing world. Certainly when people suggest Bitcoin is the best way to reach the unbanked in developing markets, in order to handle international payments and so on, I tend to counter that M-Pesa shows such things are possible without the friction and volatility that a new cryptocurrency brings to the party.

That said, a service called Kipochi is trying to provide a bridge between Bitcoin and M-Pesa, for those that might want it.

Open-ended strategy

It will be interesting to see if people in the less-developed parts of eastern Europe end up using M-Pesa as a full-on banking substitute. In Kenya, where the vast majority of its usage is, people have mostly used M-Pesa only for remittances. To try to extend its use cases, Safaricom partnered with the Commercial Bank of Africa at the end of 2012, introducing a new kind of M-Pesa-based paperless banking called M-Shwari, which provides savings and loans facilities.

Vodafone’s spokesman told me the carrier will look into providing further M-Pesa-based financial services in Romania during the course of this year. In the meantime, customers there will be able to use the system to buy airtime, pay utility bills, make deposits and withdraw cash from participating agents, and buy goods from those that take M-Pesa.Vodafone expects it to be handled at 2,000 retail and distribution points by the end of the year.

M-Pesa is not quite a sure thing yet — so far its Kenyan success has not been replicated elsewhere — but it is a lot further down the road than other mobile payment systems, and Romania will provide a keenly watched testbed for its expansion. Vodafone has a financial services license for Europe now, so let’s see where else it puts it into action.

  1. Pretty sure Orange is launching Orange Money soon there too.

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  2. I do not see m-pesa happening like other alternative currencies such as Bitcoin, Litecoin, Songcoin or Auroracoin.

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  3. Did they just call Romania a developing country? I’m from Romania and this will be a big fail, besides that almost no one will use it, The hacker and fraudsters in Romania are some of the best in the world.
    Security wise the system is very easy to bank on especially if the users would be from the rural areas.

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    1. that comment doesn’t say much positive about Romania – what’s next, you lead the world in exporting Romani and AIDS?

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  4. Bitcoin will succeed purely by being the only PUSH system that is not backdoored out of existence by NSA and Cental banks.
    Open source, almost instant, cryptographic, agnostic to nationality with no central point of failure comparing it to any other current payment system is a joke.
    The volatility is indeed a problem. It is still in price discovery mode. Wait untill the hundreds of milions of dollars that were recently pumped by VC and Wallstreet into start-ups whose products are still in development get public. Also, the ETF and barry silberts Bitcoin Investment Trust is the first step into creating liquidity so there will be no more wild swings everytime someone sneezes.

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  5. I tried Vodafone with only 1 Euro Tuesday, April 1, 2014

    Vodafone in Romania has a bad reputation. If you topped up your prepaid SIM with 1 Euro you would have only 5 days to use it, then it will be blocked. And if you use it to buy an add-on for 30 days, than your add-on will be blocked after 5 days.

    The customer service people make huge mistakes also. After asking some questions about my account, I received by email the contract and photocopy ID of another Vodafone client with details about his account. – My confirmation only adds to ‘afsaf1213′ comments about fraudsters.

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  6. Some nine million spendthrift, demanding Vodafone users will get to judge this.

    I wish I had it for ages: RO countryside [think Kenya for voice & data use & an intriguingly ripe 4G network] is the last place without any payment services at all. Remittances are the obvious use.

    Looking forward to it !

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