Uganda: Money transfers and remittances are being changed by the introduction of mobile banking

[new vision] Transferring money should be one of the easiest daily transactions a customer undertakes. But for most customers who have received money/remittances from aboard or sent money, delays and lengthy queues is something you would rather do without.

And if you are an upcountry recipient in a remote area, you could be banking on a bus or a courier service to deliver the money, meaning the time lag gets longer.

That's why the recent launch of Zain's ZAP money transfer service is another welcome relief to customers. Zain has partnered with Western Union to transfer money across Uganda. Zain officials say the service will be priced at just above the cost of sending an SMS at sh250. However, additional costs will paid by ZAP agents for buying ZAP and selling ZAP services.

This is expected to provide formidable competition to MTN Mobile Money that was piloted and launched early this year. To transfer a minimum of sh5,000 to an MTN mobile money registered user, it costs sh800. The daily limit per transaction is sh1m.

These services by the two telecom companies are riding on the success of M-PESA, a mobile money transfer service in Kenya unveiled by Safaricom, which has attracted more than four million users since its launch in March 2007.

Data shows that volumes are also growing in Uganda, with reports indicating that MTN has moved over sh5b in about 180,000 transactions since its launch in March. The step up in competition in this lucrative branchless banking will allow customers compare costs, availability and accessibility of agents and efficiency of services.

However, convenience comes at a cost because more transactions can accumulate the cost to substantial amounts. So, before you choose the service provider, seek relevant information about the money transfer services and the cost implications.

Despite the perceived risks that come with increase in volumes for these kinds of branchless transactions, the mobile phone will be a platform for delivering services to a hitherto untapped market. While banking is taken for granted in urban areas, the mobile phone will provide banking services for many rural folk who have never stepped in a banking hall. This is backed by the fact that while Uganda boasts of over eight million mobile phone subscribers, there are only two million who own bank accounts.

That's why regulators should put in place adequate protection for consumers, especially those who are using these payment services for the first time. For now, mobile users are using device PIN codes to cushion themselves against security risks.

However, as the transaction volumes increase, it will be pertinent to have an electronic commerce law that not only spells out customer rights and responsibilities but also provides added protection and a fall-back position for customers if they encounter unscrupulous agents. The central bank and players in the financial sector should look at the mobile phone as one of the tools that will deliver the financial literacy and services that are lacking in the country.

During last month's mobile money summit in Barcelona, mobile payment systems were seen as one of the services that could bring the un-banked into the financial system. If a country has an efficient payment system that is supplemented by deploying of mobile phone technology through mobile banking services, this can be used to rope in more people.

A population serviced by a system that is secure, easy to use and facilitates payments over a long distance will allow volumes of cash to be transformed into electronic value. This will eventually be included in the banking system.

The experts suggested that if people are taught to pay and receive money electronically, it can be scaled up to lessons on the importance opening accounts and saving. An added service to consider is awarding customers points or rewards for any mobile transaction they undertake, a move that can rake in volumes.

This can be backed by providing an environment that allows banks and micro-finance institutions to extend services to these mobile phone subscribers who are using mobile payment systems.

The recently launched service by Google, Grameen Foundation and MTN to provide trade and health information is a good pointer. Using the mobile phone, service providers can design alerts to avail information on how to stay in control of your money, bank charges and other financial issues. Given the explosion of mobile phone usage in Uganda, it can provide the useful tool to improve the levels of financial literacy and extend financial services across the country.

Telecom Firms Changing the Face of Money Transfer