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Last Updated: Thursday, 8 March 2007, 10:54 GMT
Migrant workers gain mobile banks
Man using mobile
More people have a phone than a bank account
In the ever-shrinking global village workers are increasingly crossing borders and even continents in the search for work.

A large number of the estimated 200 million international migrant workers need to send money to relatives who remain at home, many of whom do not have bank accounts.

A service which has just gone live in Kenya will allow city-based workers to use their mobiles to send money home to their families in remote rural areas.

It could kick-start a new era in the way money is transferred between countries. This could mean that mobile firms go head to head with traditional money transfer services to offer a kind of back-pocket bank to migrant workers.

Mobile, operators claim the scheme will be considerably cheaper than existing methods.

The International Monetary Fund estimated that to send $200 (104) back to relatives in a migrant worker's home country cost between $15 (8) and $26 (13) on average in 2005. Mobile systems could drastically reduce this.

Vodafone - the firm behind the Kenyan scheme - wouldn't confirm the cost of its service but a spokesman said it would be "significantly lower than current charges for money transfer,"

Global hub

Now anyone can have a bank in their pocket
Mutahi Kagwe, Kenyan minister for communication
The Kenyan service has been launched by Safaricom, a joint venture between Kenya's state-owned landline company Telkom and the UK's Vodafone. The service will soon be extended to workers based in the UK.

Kenya's minister for communication, Mutahi Kagwe, believes the service offers a great opportunity.

"This will help people in far-flung parts of the country who have no banking services, now anyone can have a bank in their pocket," he said.

Vodafone's ambitions in the so-called global remittance market go much wider - with plans to launch services in Eastern Europe and India.

While Vodafone's plans are restricted to countries in which it has a network presence, the GSM Association is piloting a scheme which it hopes will ultimately see mobile payment systems talk to each other on a network-neutral basis.

It is working with a group of 19 mobile operators - including Vodafone - which have pilot schemes in different regions of the world.

For operators the process of dealing with local banks - and banks have to be involved in the payment chain for regulatory reasons - can be arduous and time-consuming.

As well as working on standardising the systems so that networks and payment systems can talk to each other, the GSMA is also offering a global hub in conjunction with MasterCard, which it hopes will simplify the process of authorising and clearing the funds.

Text message

For those sending and receiving money, the system needs to be very easy to use.

Various types of money transfer schemes will be available but ultimately they will provide virtual vouchers which people can redeem for cash.

The person wishing to send money can do so via the internet or mobile phone. The mobile phone will be tied to a bank account, and software would be installed on the phone to allow the person to set the money transfer in motion.

Migrant workers
India has high proportion of migrant workers

For the recipient - who will need to be in possession of a mobile phone that can receive an SMS on any mobile network - the payment will arrive in the form of a text message, probably with a secure PIN.

That can be taken to a variety of outlets, most usually retail outlets already utilised by network operators.

Mobile networks now cover around 80% of the globe and, in the developing world, there is a similar footprint for retail outlets selling airtime.

The GSMA believes its scheme could double of number of people receiving money to more than 1.5bn, while quadrupling the size of the remittance market to more than $1trillion (513bn) by 2012.

The World Bank estimates that the current global remittance market has a total annual worldwide value of $268bn (139bn). In some cases this is estimated to account for up to a third of a country's GDP.

India is both the world's fastest growing mobile services market and the biggest recipient of overseas remittances, accounting for around 10% of the world market.

Helping unbanked

India's largest bank, the State Bank of India, is one of the key partners in the GSMA project.

"We piloted a project in a small Himalayan village of Pithoragarh in India with Airtel and have seen the tremendous results in this unbanked village," said bank chairman Mr O.P. Bhat.

"This project has the potential of transforming the lives and economies across the globe," he added.

For Chris Coffman, a senior analyst at research firm Informa, the move of mobile firms into the money transfer market is an interesting one.

"I think this will give an important boost to mobile payments globally, because it addresses some of the problems inherent with international remittances today - the first being that many of the recipients are unbanked, and another being the high cost of money transfers," he said.

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