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GSMA and MasterCard get into Mobile Money transfer

Thursday 22 February 2007

The GSM Association formed a special group of 19 mobile operators with networks in over 100 countries, and representing over 600 million customers. For this operation, the GSM Association partnered with MasterCard Worldwide and its 25,000 bank network worldwide. The GSMA and MasterCard plan to pilot a global hub that will link together national markets and the local payment systems run by mobile operators in partnership with those local banks. The project also involves the Consultative Group to Assist the Poor, a microfinance group housed at the World Bank.

The remittances market is already huge, both in terms of amount and in terms of numbers of people involved. The GSM believes this program could double the number of recipients of international remittances to more than 1.5 billion, and the size of the international remittances market could reach more than US$ 1 trillion (EUR 760 billion) by 2012.

The project promoters aim at reducing the transaction costs to a few percent when they may now be over 20% for low amounts (below US$ 50 or EUR 38). The target is clearly to take advantage of the existing mobile infrastructure to come in competition with remittance specialists such as Western Union, which is now a public company after having been for years a subsidiary of First Data. Western Union revenue for 2006 was US$ 4.5 billion (EUR 3.4 billion), a 12% increase vs. 2005, and the company net income reached US$ 1.3 billion (EUR 1 billion).

The world population is over 6 billion people, but only around one billion have a bank account. On the other hand, there are close to 3 billion mobile phone subscribers.

India, is both the world's fastest growing mobile services market and the biggest recipient of overseas remittances in the world, accounting for 10% of the world market. The World Bank has estimated that about 20 to 25 million Indians working across 130 countries sent over US$22 billion (EUR 16.7 billion) to India. Bharti Airtel, a major Indian mobile operator and State Bank of India are to be part of the project. In India, mobile services have now reached all classes of society: 20% of mobile users in India do not even own a bicycle.

Philippines is also a major remittance market, and Smart Communications, a local operator, has plans to partner with phone operators and banks in Bahrain, Italy and other countries for such projects.

The technical details of the GSM Association – MasterCard program are not yet disclosed, but there is already no doubt it will not be welcome by current big players in the remittances market such as Western Union, and may have to overcome some regulatory issues.

Another initiative aiming at capturing a share of the global remittances market comes from Vodafone in the UK partnering with Citigroup to offer international money transfer services. The system will be based on SMS exchanges, and request the person sending the money to be a Vodafone subscriber. The first target market is Kenya where the service will be available by the end of this month, and then Vodafone and Citigroup plan to expand the service into Poland, India, and countries in Eastern Europe by end of 2007.