Mobile money revolution spreads to Europe as Vodafone brings M-Pesa to Romania

Vodafone(s vod) has launched M-Pesa in Romania, marking the first time the widely used mobile money system has made it across to Europe.

M-Pesa has almost 17 million users around the world, but there’s a good chance you’ve never heard of it. It’s been around for around seven years in Kenya, and from there it’s spread to Tanzania, South Africa, India and Afghanistan. In all of these developing markets there are millions of people who lack formal bank accounts but do have mobile phones, and M-Pesa lets them use their handsets to make and receive payments.

In other words, while carriers and other players are still trying to get the idea of the mobile wallet up and running in the western world, that revolution has already taken place elsewhere. It may be less pretty than a fancy smartphone app, being largely based on SMS, but in Kenya, where Safaricom (part-owned by Vodafone) first launched M-Pesa, it is now the conduit for 43 percent of gross domestic product.

Banking without banks

In Romania, people can use M-Pesa to send amounts as low as one new Romanian leu ($0.31) or as much as 30,000 lei ($9,257) per day. What’s more, a Vodafone spokesman told me on Monday that the carrier would be looking into enabling international remittances to Romanian M-Pesa accounts, as is already possible in other markets.

Here are Vodafone’s charges for using the system in Romania:

MPesa Romania tariffs

Romania has many unbanked people, particularly in rural districts, so the system gives them a handy and fairly cheap alternative to cash. Vodafone’s spokesman told me the carrier is evaluating other countries in the region, and said any further rollout would be “likely to be somewhere with a similar financial infrastructure.”

If this stuff is priced right, to my mind it undermines many of the key arguments for using Bitcoin as a currency in the developing world. Certainly when people suggest Bitcoin is the best way to reach the unbanked in developing markets, in order to handle international payments and so on, I tend to counter that M-Pesa shows such things are possible without the friction and volatility that a new cryptocurrency brings to the party.

That said, a service called Kipochi is trying to provide a bridge between Bitcoin and M-Pesa, for those that might want it.

Open-ended strategy

It will be interesting to see if people in the less-developed parts of eastern Europe end up using M-Pesa as a full-on banking substitute. In Kenya, where the vast majority of its usage is, people have mostly used M-Pesa only for remittances. To try to extend its use cases, Safaricom partnered with the Commercial Bank of Africa at the end of 2012, introducing a new kind of M-Pesa-based paperless banking called M-Shwari, which provides savings and loans facilities.

Vodafone’s spokesman told me the carrier will look into providing further M-Pesa-based financial services in Romania during the course of this year. In the meantime, customers there will be able to use the system to buy airtime, pay utility bills, make deposits and withdraw cash from participating agents, and buy goods from those that take M-Pesa.Vodafone expects it to be handled at 2,000 retail and distribution points by the end of the year.

M-Pesa is not quite a sure thing yet — so far its Kenyan success has not been replicated elsewhere — but it is a lot further down the road than other mobile payment systems, and Romania will provide a keenly watched testbed for its expansion. Vodafone has a financial services license for Europe now, so let’s see where else it puts it into action.