UK-headquartered Vodafone, the world’s largest mobile
telecommunications group, is placing greater emphasis on mobile
phone based banking, payment and remittance services.

The group has published its latest policy report calling for a
new regulatory framework to encourage mobile phone-based financial
transactions in developing countries in an effort to transform
access to financial services.

In the UK, Vodafone has also just rolled out a basic m-banking
service for its 17.4 million subscribers, offering customers of
HSBC, First Direct, Alliance & Leicester and, from later this
summer, Royal Bank of Scotland, NatWest and Ulster Bank in Northern
Ireland, the ability to check their balance, request a
mini-statement and top up their ‘pay as you talk’ mobile

The developments come four months after the group announced it was
piloting an international m-payments service between the UK and
Kenya in conjunction with Citigroup. At the start of February,
Vodafone and Citi revealed they were testing a plan based on
Vodafone’s established M-Pesa m-payments programme in Kenya run by
its affiliate Safaricom, which allows Kenyans to send and receive
money via mobile phone text messages and collect the cash at
Safaricom outlets and other agencies.

The social impact

The Transformational Potential of M-Transactions report, Vodafone’s
third policy paper focusing on the social impact of mobile phones,
discusses changes that need to be made to existing banking
regulations to encourage mobile phone-based financial services in
underbanked emerging economies.

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The report, compiled on Vodafone’s behalf by leading economists
from development associations Frontier Economics, Groupe d’Economie
Mondiale and consultants to the World Bank, found that over the
past two years, pilot financial services programmes in Africa and
Asia have highlighted the potential for mobile phones to deliver
basic financial services in developing countries – services that
provide a real opportunity for poorer people to get on a formal
banking ladder.

Discussing the report, Alan Harper, director of Vodafone group
strategy, said: “In a country such as Kenya there are 400 bank
branches, 600 ATMs and 10 million mobile phones. There is clearly
the potential to bring access to finance for hundreds of thousands
of individuals for the very first time.”

But the report warns that existing banking regulation is
inappropriate for the growth of m-transaction schemes. It calls for
regulators to ensure that they do not restrict commercial
experimentation or limit schemes to sub-economical scale, and
suggests some key changes, including a review of deposit taking,
access to the clearing system for m-transaction operators,
adaptation of ‘know your customer’ and anti-money laundering rules,
and interoperability of m-transaction schemes.

Diane Coyle, author of the report, said: “A regulatory approach
that tries to force m-transactions into the existing structure of
retail banking regulation and financial supervision could impose
high fixed costs and significant compliance problems. Any new
framework needs to be risk-based, sensitive to practical issues
relating to underserved developing markets, and encourage
experimentation and innovation.”

In a separate report published on 9 July, US research group Juniper
said it was predicting that person-to-person fund transfers and
mobile payments in the developing world, together with the
commercialisation in 2009 of near field communications-based
m-payments, will generate transactions worth approximately $22
billion by 2010. The report cited Vodafone’s M-Pesa service in
Kenya as an example of best practice.

Internet On Your Mobile

In the UK, Vodafone has rolled out its new m-banking service free
of charge until the end of 2007. Part of the group’s Internet On
Your Mobile package of services, it is being run in conjunction
with the MoniLink network, itself developed over the past three
years by VocaLink, the UK’s ATM interchange network, and Monitise,
a mobile banking specialist.

Vodafone customers register their bank account for MoniLink mobile
banking directly from the Vodafone Internet On Your Mobile home
page. Once registered, customers can connect to their account using
a secure application stored on their mobile. On accessing MoniLink,
the customer is prompted to enter a unique passcode, registered
with their bank or building society, before secure access is
granted to their account.

Al Russell, head of Vodafone Internet On Your Mobile, said in a
statement: “With the launch of the Vodafone Internet On Your Mobile
we want to give customers access to all the services they see as
essential. Banking is one of the most important services that our
customers use.”