In the epicenter of global m-banking today(Kenya), the M-Banking 2009: Balancing Regulation and Innovation conference in Nairobi was a landmark event–bringing together bankers, telecoms and Central Bankers to hash out the issues and resolve the tensions between them. The protagonist was/is Safaricom’s  M-PESA money-transfer-by-mobile phone, which has caught bankers flat-footed.

From hotel porters to members of Parliament, everyone is using M-PESA, to send money home to villages, pay bills and tuition–and store money in their phone.  Even in Kibera, the largest slum in Africa with 1 million people living without electicity or sewage, M-PESA is being used by local savings groups to mobilize money.  Some groups have used their meager savings to invest on the stock market–in M-PESA.

Organized largely by students at The Fletcher School (Center for Emerging Markets Enterprises) and co-sponsored by the Kenya School of Monetary Studies, with lead support from Kenya’s Equity Bank, the conference provided a forum for the Central Bank of Kenya to address simmering tensions between the banking community and Safaricom, whose M PESA mobile-money transfer system is spreading like wildfire. With more than 6 million M-PESA accounts, more people in Kenya are transferring money by mobile phone than have bank accounts.

High-level Kenyan dignitaries included the Governnor of the National Bank, the Vice President of Kenya, and the Ministers of Finance and Communications. Attendees included the Central Banks of Uganda, Tanzania, and Rwanda, numerous commerical banks, Safaricom,  and interested parties primarily from Africa and Europe, butalso including World Bank’s CGAP and Bankable Frontiers from the U.S. The presentations and debate were high-level and high-spirited.

The week of the conference,  Business Daily Africa ran a 12-page spread representing numerous points of view; during and after the conference, local TV and print media ran multiple stories.

More updates to follow…I’m going to predict, there’s something happening here.

M-PESA, the extremely popular mobile-banking product offered by mobile carrier Safaricom in Kenya, is being audited by the Central Bank of Kenya.  In December, a cartel of local banks attacked M-PESA as a “Ponzi” scheme and asked the government to investigate.  See the story in allAfrica.com.

M-PESA, launched by Safaricom in 2007 in conjunction with Vodafone, has gotten the attention of bankers because of its quick growth. M-PESA now has 5 million users and 5,000 outlets–compared to 3 million with bank accounts at 750 banks.

Because M-PESA is primarily aimed at the “unbanked” population, the limit on a single transfer is under $500.

Safaricom overall counts 12 million users.

The mobile banking phenomenom is one of the more exciting and unpredictable offshoots of the cell phone revolution in poor countries. People who until very recently had no phones and no bank accounts are now transferring money by phone.

M-banking is most pronounced in the Phillippines, where it started, but it’s heating up in Africa. Vodafone in conjuntion with Safaricom in Kenya recently launched M-PESA (“mobile money” in Swahili), initially with the intention of streamlining microfinance operations by allowing loans dispersal and repayment by cell phones. In three months, the service has attracted 175,000 subscribers, who aresigning up at the rate of 2,500 a day.

Nick Hughes, Vodafone’s head of international payments, told The New York Times (In Poorer Nations, Cellphones Help Open up Microfinancing):

“The idea was to reduce the cost of loan disbursal and recovery, but what we found was that customers were using it for person-to-person transfers.”

Customers don’t need a bank account, but can load money into their phones by paying cash at selected outlets, including grocery stores and gas stations. They then text money (“stored value”) to other cell phones.

The Vodafone/Safaricom m-banking case study is fully detailed in Innovations journal (MIT Press), in the current issue (M-PESA: Mobile Money for the “Unbanked” Turning Cellphones into 24-Hour Tellers in Kenya). The June 28th Economist has a piece on M-PESA called Dial M for Money. And, of course, there Chapter 9 in my book, Cell Phone as Wallet, which tracks the evolution of mobile banking. 

The Times’ article (above) also describes the way new technologies, including fingertip authentication, are being used by microlenders to extend the reach and efficiency of their lending operations.