M-Pesa mobile payment scheme could be launched across EU under 'passporting' rules, says expert

Paris-based telecoms law expert Diane Mullenex of Pinsent Masons, the law firm behind Out-Law.com, said, however, that strict regulation and competition from "traditional banking services" would have to be overcome if M-Pesa, or other mobile payment schemes, are to make it into widespread use within the EU.

Mullenex was commenting after Vodafone confirmed earlier this week that it had launched the M-Pesa mobile payment service to its customers in Romania. Consumers can make low value retail payments and transfer money using their mobile through the M-Pesa scheme.

M-Pesa was launched in 2007 in Kenya by mobile network operator Safaricom and has played a significant role in the rise of mobile payments within the country since then. Vodafone holds a minority stake in Safaricom. In Kenya, mobile payments now make up about a third of all payments. M-Pesa has been rolled out in a number of other countries too.

"No one can question that the success of M-Pesa in Africa is outstanding," Mullenex said. "In less than 10 years this service became a reference of mobile payment over the continent, with a market penetration rate above 30% in Kenya and millions of users in Tanzania. The service has been exported in South Africa, Egypt, Mozambique and even India, more or less successfully."

"The success of M-Pesa in Kenya is due to a combination of factors: the low number of people using banking and financial services – 13% of the population in 2007, the higher usage of mobile communications at that time – 25% in 2007, the geography of the country – wide territory with populated areas very distant from one another, and a favourable and incentivising regulatory framework," the expert said.

Mullenex said, though, that M-Pesa had faced some setbacks when launching in some countries. In South Africa the scheme had to adapt to "a more stringent regulatory environment" and was not targeted properly at the right "customer base", she said. In other countries, including Tanzania, "the service was not supported by a sufficient number of transfer agencies". Mullenex said that it would therefore be interesting to see how the Romanian market reacts to the launch of the M-Pesa scheme.

"The regulatory framework within the EU in relation to payment services or e-money is quite stringent and these types of services may be quite difficult to market in some other EU countries where traditional banking services are well established," Mullenex said. "However, the fact that such a service be validly licensed in an EU country will allow for the passporting of the service throughout the EU. It will be fascinating to follow and witness the evolution of the financial services market with the integration of telecommunication operators as major players and to see how Vodafone adapts its service to the specificities of each local market."

"It will be all the more fascinating, as these services, which may be targeted towards migrant people, may cover for the needs of a market estimated to be worth $300 billion in transactions, whose needs are not currently addressed by the current offer of financial services, as explained by Harvard Business School professor Sunil Gupta last year," she said.

Under pan-European single market initiatives, companies that are authorised to provide payment services in one country can deliver similar services in other EU countries.

In a statement Vodafone director of mobile money Michael Joseph said that whilst most Romanians have at least one mobile device each, more than a third of the population in the country "do not have access to conventional banking".

"Vodafone M-Pesa is already used regularly by nearly 17 million customers and we look forward to bringing the significant benefits of the service to the people of Romania," Jospeh said.