During the East
Africa Com Conference at Safari Park on 9th and 10th
September 2014, one thing caught my eye- International
Airtime Remittance. The statistics involved are just mind boggling. For
instance, in general, there are over 200 million foreigners in
diaspora sending approximately 400 billion dollars to their home countries in
cash. According to the Central Bank of Kenya, Kenyans remitted around 1.29
billion dollars in 2013 alone, which translates to 114 billion Kenya Shillings
in cash. However, sending cash has hitherto been expensive. An alternative to
remitting cash is to remit mobile air time instead. Mobile airtime is
considered an electronic product, rather than cash, by most regulatory
authorities, and is therefore easy to manage. Many people in diaspora now
choose to use air time remittance as a gift for friends and family in their
home country; a little bonus on top of a weekly cash remittances, or something
to encourage the family member to phone. It is cheaper and allows them to send
money is small denominations.
A study by Juniper
Research indicated that international transfers made via mobile phone top up exceeded
$10 billion in 2013. In the developing world, there are 2.7 billion people who
do not have a bank account. At this same time, there are 1 billion people who
have cell phones in these areas. The overlap of these numbers is substantial. In
Kenya, mobile penetration is at 78% while the banking is at 40% of the population.
Many people without bank accounts have cell service. For those in developing
countries, buying airtime for them could really make a difference. By having
someone complete an airtime purchase on their behalf, individuals with a cell
phone and no bank account can continue to stay in touch. This has propelled the
growth of International airtime remittance.
How does it work? International Airtime Remittance can be implemented
using a number of channels available to users, including web portals, SMS,
USSD, Mobile Web Apps and Android Apps that can be fully customized. The
solution requires a trans-global entity, providing a platform to integrate with
mobile operator top up systems in different countries. The International Top-up Operator
purchases airtime from international mobile operators at a wholesale or
discounted rate. By offering international top up, retail
channels can enable their customers to conveniently purchase airtime and send. Retail
distribution channels purchase airtime from the international top-up operator,
and sell airtime to customers for a service fee added to the top-up amount at
the time of sale.
The future of
International remittances is bright, with operators looking to offer consumers
ability to seamlessly send value across virtually any border to any recipient
without traditional intermediaries. For instance, paying electricity bills,
dental bills, or school tuition with the same ease as sending of airtime from a
prepaid mobile phone. Over the last few years, Kenya Power and Lighting Company
has been rolling out prepaid meters for urban households and has installed
approximately 400,000 meters. Instead of the postpaid meter, you’ve got a
prepaid meter and as soon as there is no money left in the meter, the light
goes out. Once this happens, the consumer buys prepaid tokens to resume the
service. What if a relative living in the diaspora to top up your prepaid
electricity meter to ensure that your lights never go off?
Another
example of a prepaid utility service is the M-Kopa Solar. The solar lighting
system offers clean lighting solutions to millions of homes that are not on the
electricity grid. M-Kopa provides pay as-you-go solar home solution and comes
with two LED solar lights and one solar rechargeable LED torch, and a larger 8W
panel that gives 60 percent more charging capacity.
Following
the removal of VAT on solar-powered devices, M-KOPA Solar charges an initial
deposit of KES 2,999 followed by 365 daily payments of KES 40. The growth of
this service has been tremendous. M-Kopa is currently connecting 2,000 homes to
solar every week, with a customer base of around 90,000 and targeting 1 Million
customers in the next four years. Most of the M-Kopa customers are in the rural
areas, some have relatives in the diaspora. Considering it only costs $0.40 per
month to use the solar solution, most people in the diaspora would be more than
happy to support their families back at home. There are many existing and
upcoming pre-paid utilities that may use International remittances in the near
future.
