[abenga]

(Kenyan here) I think that the fact that Kenya did not have such a large banking industry helped M-Pesa succeed. By the time the local banks realised that it threatened to eat into their business, it had become too big and popular to beat. We had the local banking association petition the Central Bank to introduce regulations on it, the cost of compliance to which would have made it a lot more costly than it is, and subject to a lot more bureaucracy. Luckily, the proposal did not go through.

[knowtheory]

At the same time... Vodafone doesn't have any banking regulations like deposit insurance does it? That seems like a big deal to me. What happens if Vodafone goes out of business? What happens if they decide to just keep the money and shut down the service?

These are low likelihood events, but then, so was the financial collapse of 2008.

[roguecoder]

The financial collapse was caused by highly-leveraged banks relying on complex opaque models to "manage" risk while making loans and purchasing financial assets.

Since neither Vodafone nor Safaricom are engaging in lending, borrowing or betting on assets those risks don't exist. It is more akin to pre-paid credit cards than traditional banking.

[Retric]

I don't think you can know what Vodafone does with money in it's care.

[roguecoder]

Safaricom is a public company: http://www.safaricom.co.ke/fileadmin/Investor_Relations/Docu...

[natrius]

If they were doing those sorts of things, they'd presumably be regulated as a bank in Kenya.

[muriithi]

Like most start-ups the established players underestimated the capacity of the new kid on the block to eat their lunch[1].

By the time banks ganged together to lobby against the service it was too late [2].

[1] http://www.moneyweb.co.za/mw/view/mw/en/page292681?oid=55103...

[2]http://kenyaaudit.blogspot.com/2008/12/banks-now-gang-to-fin...

[slurgfest]

The point is more likely to be transactions than savings

[yxhuvud]

If it ends up being big enough for long enough, then people will start storing value in it due to convenience.

[commanda]

Does m-Pesa work securely enough to not need those proposed regulations then? The consumers are protected against fraud for the most part already?

[abenga]

I've never heard of a technical exploit compromising the M-Pesa infrastructure. Social engineering cons are on the rise, though (like sending a dummy text telling you that someone sent you money, then calling and requesting that you send it back to correct the error. If you fall for it, and have money in your account, you send them your money). Those are much harder to police, though a proposed requirement that all phone numbers sold be registered to an individual with ID may reduce these in the future. Short of sharing your PIN, it's hard to think of a way to reach into one's account and steal money.

[ealloc]

When you send money to another individual what kind of check is there that you've sent the money to the right address? I read there's a confirmation step but in the event you accidentally sent the money to a random person that person could confirm too. Maybe a CRC on the phone number?

[abenga]

You receive a text notification of the transaction when it goes through, which has the recipient's full names. In case the names are different from what you expected, you can call a customer care number and have the transaction reversed (as long as they haven't withdrawn the money yet). Interestingly, this facility leads to another type of confidence con: a stranger walks up to you and tells you that they need cash but cannot get an agent nearby. You have them send money to your phone and you give them your cash. After they walk away they call the operator and claim they sent the money to a wrong number, and the transaction is reversed.

[GFischer]

My bank has no check that you've sent money to the right account when you do a deposit (and I hate that). (Banco Itaú in Uruguay).

So it's no different in that.

[artsim]

There is no real protection against fraud at the moment, the operator Safaricom is fighting to block conmen from the system hence the push for subscriber registration

[chanux]

Ah I guessed right. Regulations are the reason why this is not done well in other countries.

Anyhow, m-pesa is right thing done in right place. Props to Kenya!

[nodrama]

Yes. I was thinking at some similar service. With a bank (regulations), you go there, make a deposit for $10 and you will have $10 in your account. With a mobile operator (no bank regulations) if you give them $10 for anything (like pre-paid credit) they will have to charge you VAT for that amount. So what you want is a mobile operator that can take your money but not apply VAT.