Mobile-Money Systems: M-PESA And Monese

The Economist: Paying for a taxi ride using your mobile phone is easier in Nairobi than it is in New York, thanks to Kenya’s world-leading mobile-money system, M-PESA. Launched in 2007 by Safaricom, the country’s largest mobile-network operator, it is now used by over 17m Kenyans, equivalent to more than two-thirds of the adult population; around 25% of the country’s gross national product flows through it. M-PESA lets people transfer cash using their phones, and is by far the most successful scheme of its type on earth. Why does Kenya lead the world in mobile money?

M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash and thus making possible lower interest rates. But after pilot testing it was broadened to become a general money-transfer scheme. Once you have signed up, you pay money into the system by handing cash to one of Safaricom’s 40,000 agents (typically in a corner shop selling airtime), who credits the money to your M-PESA account. You withdraw money by visiting another agent, who checks that you have sufficient funds before debiting your account and handing over the cash. You can also transfer money to others using a menu on your phone. Cash can thus be sent one place to another more quickly, safely and easily than taking bundles of money in person, or asking others to carry it for you. This is particularly useful in a country where many workers in cities send money back home to their families in rural villages. Electronic transfers save people time, freeing them to do other, more productive things instead. Read the full article

TECHCRUNCH: Fintech in London and Europe as a whole remains fertile, including a number of startups attempting to innovate around the humble bank account. Best known is perhaps Germany’s Number26, the mobile banking app backed by Peter Thiel’s Valar Ventures. And just this week we covered the pending battle between Starling and Mondo, two mobile-first startups hoping to become fully licensed U.K. banks in their own right.

Now news comes of another new banking upstart: Monese is a soon-to-launch U.K./European mobile banking service for immigrants and expats who might otherwise find it difficult to open a bank account outside of their originating country.

The London, U.K. and Tallinn, Estonia-based company is disclosing that it’s picked up $1.8 million in backing from pan-European accelerator Seedcamp, the taxpayer-funded VC SmartCap, and Spotify advisor and investor Shakil Khan, amongst others.

“All you need from a bank, without the bank,” reads Monese’s signup page. That’s in reference to that fact that, unlike the ambitions of Starling and Mondo, the startup isn’t applying for a full U.K. banking license, which would enable it to do things like offer credit and lend out its customers deposits as a means of generating revenue. Instead the company is defined by the regulator, the Financial Conduct Authority, as an Electronic Money Institution. Read the full article