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Among Senegal's 12 million citizens, only about 500,000 have access to bank accounts. But about eight times that many carry mobile phones, according to Mung-ki Woo, vice president of payment and contactless at France Telecom-Orange, a France-based telecommunications company.

And most Senegalese consumers get their mobile service through Orange subsidiary Sonatel. "People who do not have access to bank accounts, they use cash," Woo says.

Orange believes it one day can turn that cash into "Orange Money," or mobile accounts unbanked subscribers could use to pay bills, make purchases and receive funds sent from family and friends, all with their mobile phones. Orange could earn transaction fees from subscribers sending funds and commissions from merchants accepting the funds as payment, Woo says. 

Besides in Senegal, the large mobile-operator group plans to launch domestic mobile funds-transfer pilots in three other countries where it has branches, Ivory Coast, Egypt and Jordan, and it could move to commercial service within these and other markets within 18 months, says Woo. "That's a market [banks] don't address," he tells Cards&Payments. 

Orange is not alone in gearing up to try to tap into the global market for remittances, which in 2007 topped US$300 billion (216 billion euros), according to the World Bank. About 75% of the global funds transfers went to individuals in developing countries. The bank estimates the actual amount of funds migrant workers and others sent around the world actually was much greater.

No wonder a number of companies, from mobile operators to payment card organizations, are planning to make a play for this market, which U.S.-based Aite Group projects will top US$400 billion globally in 2010. Aite and other observers believe adding mobile phones and networks to conventional remittance channels could accelerate growth in the market, which slowed to 7% last year, mainly because of the weakening U.S. economy, according to the World Bank. 

Phones and mobile networks reach where bank branches and ATMs do not. They could make it easier and less expensive for, say, a Filipina housekeeper in Bahrain or a Mexican laborer in the United States to send funds to family back home, say supporters of the mobile funds-transfer concept.

"There's something very big bubbling along here. [Remittances are] a colossal market, so getting even a small chunk of it is worthwhile," says Dave Birch, a director at Consult Hyperion.

The UK-based consulting firm is advising the GSM Association, the telco trade group, on its global Mobile-Money Transfer initiative. "You have nonbank competitors, by which we mean telcos, having an opportunity simply because there is no [widespread] banking infrastructure" in developing countries, Birch says.

Banks and payment card networks, along with traditional funds-transfer organizations such as Western Union, risk getting cut out of part of the growth by mobile operators, he says.

Orange and UK-based Vodafone Group, among other large operator groups, are laying the groundwork to enter this market. And although in many cases their services will involve banks and funds-transfer organizations at some point along the remittance chain, their goal is to hold the dominant relationship with the customer.

In Kenya, for example, Vodafone has launched a fast-growing domestic funds-transfer service without banks. The operator uses its own agents to collect and dole out the cash, prompted by phone text messages sent by individuals remitting the funds Chart of Funds-Transfer Pioneers.

Vodafone charges low fees, ranging from 30 to 100 Kenyan shillings  (US49 cents to $1.63) to send funds with the service M-PESA, seeking mainly to add to its subscriber rolls, says Nick Holland, Aite Group senior analyst. The telco benefits from a lax banking regulatory environment in Kenya.

Vodafone is acquiring 200,000 subscribers per quarter, Holland says. "The growth rate is unbelievable," he says, adding Kenya's political turmoil only adds to the growth because subscribers see M-PESA as a safe place to stash funds.

Vodafone has launched a similar domestic remittance service in Afghanistan and later plans to expand to India and other countries.

Last year Vodafone announced plans to launch an international remittance service that would enable subscribers of its flagship UK operation to remit funds first to family and friends in Kenya on a trial basis then to other countries in Asia, Africa and Eastern Europe. But for international transfers, Vodafone needs financial institutions, and Citigroup's Global Transaction Services unit joined in the announcement.

Vodafone is part of the GSM Association Mobile-Money Transfer initiative launched in February 2007. The initiative counts more than 30 mobile-network operators as supporters, along with MasterCard Worldwide and Western Union. Its goal is to help mobile operators launch pilots and then commercial service to enable some of the roughly 200 million migrant workers around the world to send funds home using their phones.

Weak Banking Access
As many as 80% of adults around the world lack direct access to traditional banking channels, say experts. At the same time, mobile networks cover more than 80% of the global population, according to the association.

Not all of these individuals have mobile phones, but phone penetration is growing rapidly. It is projected to top 50% of the global population this year, according to the International Telecommunication Union. Mobile-phone use is growing fastest in developing countries, the places where banking infrastructure is weakest.

"There is a 2,000-to-one (ratio) of mobile phones to ATMs in the world, giving mobile operators a reach far outstripping access by banks," Gavin Krugel, a director of strategy and development at the association, said during a speech at a mobile funds-transfer seminar at the Mobile World Congress in Barcelona in February.

The association projects global remittances to top $1 trillion by 2012 with the help of phone networks, although other market observers put the figure much lower.

In any case, most mobile operators interested in the remittance market have concluded they need banks or other financial institutions as partners, especially to comply with anti-money laundering and other regulations in various countries where funds are sent and received.

MasterCard and Western Union could provide global funds-transfer hubs into which the mobile operators would connect. And in many cases, the card networks and funds-transfer organizations also would provide the points at which senders and recipients would deposit their funds and collect them.

Only 10% of today's remittances go through retail-banking networks, notes Simon Pugh, senior vice president for MasterCard's mobile advanced payments unit. By getting involved in the mobile-remittance initiative, MasterCard sees an opportunity for its affiliated banks to sign up more banking customers and open more card accounts.

"Every bank we talk to is absolutely interested in the mobile channel," Pugh says.

Banks and funds-transfer organizations, such as Western Union, have no intention of playing second fiddle to mobile operators for control of the customer–not with a market  valued at more than US$18 billion for remittance-service providers, according to Aite. Pugh quoted the figure in his presentation at the Mobile World Congress in Barcelona, in which he laid out MasterCard's strategy to expand its person-to-person funds-transfer service, MoneySend, to mobile phones.

The idea is for senders to use banking or card accounts to send funds via MasterCard's clearing and settlement network. Using their phones, senders more easily could initiate the transfers with, for example, their account details stored in a mobile wallet on their handsets.

On the other end, recipients would receive text messages or other communications on their phones notifying them the funds have arrived. They would need debit or prepaid card accounts to get the cash from ATMs or to make purchases with the funds at merchant locations that accept MasterCard.

The transfers would be faster and fees more transparent than those charged by conventional funds-transfer organizations, contends Pugh. This could help lower consumer fees, which often amount to 10% to 15% of the amount remitted.

Visa Inc. also is interested. Last fall the card brand announced plans for a mobile funds-transfer trial with three banks in India. The trial would add to Visa's card-to-card funds-transfer service launched in India in 2004.

Few And Far Between
One problem with the MasterCard and Visa strategy is that ATMs and point-of-sale terminals are scarce in many of the most-popular destinations for remittances, such as India.

"Theoretically, the card-to-card model makes a lot of sense; it's fairly simple and can be done today," says Red Gillen, a senior analyst for U.S.-based research and consulting firm Celent. "[But] if you're in some mountainous or remote region, the nearest ATMs are 300 to 400 miles away."

MasterCard late last year joined with State Bank of India to launch a MoneySend pilot in India not involving mobile phones. But it has yet to launch a mobile funds-transfer pilot under the GSM Association initiative, despite having announced its intention to do so last year. Pugh says this pilot will launch later in 2008 in Asia. Recipients of mobile remittances in the Philippines and South Africa already can use MasterCard-branded cards for ATM withdrawals and purchases, although it is unclear how often they use them.

The card is only one option for remittance recipients. Some observers believe as mobile-payment schemes multiply, many recipients will keep the electronic funds on their phones, spending the funds with merchants that use their own phones as point-of-sale terminals. And they also could send the e-money to friends via phone-to-phone transfers.

Western Union believes most recipients would rather have the cash. The U.S.-based company, which claims to have the highest share of the formal remittance market, at 17% of global volume in 2006, increased its agent network from 130,000 to 335,000 between 2001 and 2008, including adding 50,000 agents in India.

But Western Union foresees a big role for mobile phones in the remittance market. The phones would provide the user interface for senders and recipients, hooking into the same backbone of agents and networks used for conventional transfers.

Phones could enable Western Union to cut out some steps in the process. Workers also could send remittances more frequently and in lower amounts, which might lessen the risks for the transfer organization, says Matt Dill, general manager for Western Union Mobile. This could reduce fees that Dill acknowledges sometimes run more than 20% of the amount sent in high-risk markets.

Western Union has been "very aggressive" in gearing up for mobile funds transfers, says Celent's Gillen. Since late November, it has announced participation in pilots in the Philippines and India.

And Western Union supports a service launched by U.S. mobile operator Trumpet Mobile, which rents network capacity from more-established operators. The operator, which caters to the Hispanic market, is enabling subscribers to send funds throughout most of Latin America and the Caribbean, tying into Western Union's network.

But even with more than 330,000 agents, Western Union cannot match the reach of mobile-network operators, says Gillen. "If you look at the quantity of mobile agents, they greatly outnumber Western Union's," he says. 

Survey Says: Telcos In
And operators are keen to offer the remittance services, according to results of a survey conducted for the GSM Association by U.S.-based consulting firm Edgar, Dunn & Co. More than 70% of operators in developing countries and at least 47% of telcos in industrialized countries responding rated funds transfers–both domestic and international–as "extremely important" to their strategy for offering mobile financial services Survey FindingsMore Findings.

"Operators feel this market is not being served well, and the market is huge, and they already have the technology," says Edgar, Dunn analyst Samee Zafar.

After its four pilots planned for this year, France-based operator Orange hopes to "put in place an industrial-grade deployment process" that could enable it to offer mobile-remittance services throughout sub-Saharan Africa and in other emerging countries in the Caribbean and Middle East, says Woo.

Workers send billions of euros every year alone from France to Africa, he notes. And Orange intends to grab a small piece of it, although it probably will partner with banks to store the accounts.

"It's highly profitable; those companies that operate in this [remittance] market enjoy a nice return on investment," Woo says.

Mobile telcos such as Orange and the more-established players in the remittance market say mobile phones and networks will enable them to reach many more customers. And they hope there will be more than enough profits to go around.  CP

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