Vodafone to launch mobile phone money transfer service in Afghanistan

Vodafone to launch mobile phone money transfer service in Afghanistan

In many poor and emerging countries, the lack of banking infrastructure but widespread use of mobile phones has created a business opportunity that network operators are keen to exploit.

On Monday, British operator Vodafone announced at the industry's annual trade show in Barcelona that it would launch a money transfer service in Afghanistan after the successful introduction of a similar initiative in Kenya.

An estimated 1.6 million people have begun using the Vodafone scheme in Kenya since its launch in March last year. In a country of 10 million mobile phone users, there are only 400 bank outlets and 600 automatic teller machines.

"This is really the early days, but when you see the low banking penetration in emerging markets, compared to rapidly growing mobile penetration, the potential is very big," said James Moberly, senior manager for payment solutions at Vodafone on the sidelines of the Mobile World Congress here.

The GSM Association, the global mobile phone industry body, estimates that about a dozen such schemes involving money transfer services are in operation throughout the world, with 10 million users.

Vodafone plans to launch cash transfer services soon in India and other African countries.

"You can send money, withdraw cash, pay your bills or your loan, and all this is within seconds," said Aleeda Fazal, head of product development at Afghan group Roshan, which is the partner for Vodafone in the troubled country.

In effect, the network operator acts as a money transfer agent for the subscriber.

The user deposits money and then sends an SMS to a person who can go to a phone shop anywhere in the country and take out the amount stipulated in the text message.

Operators win in three ways, explained a spokesman for the GSM Association, which represents 700 mobile operators.

"The operator gets a small commission, but above all it boosts customer loyalty and it increases traffic on its network", said David Pringle.

The problem, or opportunity, at the moment is that the cash transfers can only be done within a country, excluding the millions of migrant workers who send money home regularly from abroad.

The GSM Association cites figures that 200 million people work in a country that is not their own, on average sending home 2,000-3,000 dollars per year to their loved ones.

This puts the value of the international money transfer market at about 250 billion dollars, with India, China and Mexico the biggest destinations for cash.

International money transfers are long, complicated and are also limited by the lack of banking infrastructure in many developing countries.

With a view to promoting the idea of cross-border money transfers via mobile phones, the GSM Association launched last year a pilot programme with 19 operators in 100 countries and involving Mastercard and international transfer specialist Western Union.

If a solution can be found, the GSM estimates that the flow of funds could increase by four-fold by 2012, reaching 1,000 billion dollars.