> Posted by Jeffrey Riecke, Communications Associate, CFI

M-Pesa, the mobile money service success story that began in Kenya in 2007 is continuing its march, this time into the surprising location of Romania, raising the questions, what will the product look like in this new European market and how will it fare. At the end of last month Vodafone, the operator behind the new service and one of Romania’s largest telcos, began operations using the country’s 300 Vodafone Romania stores, participating retail outlets, and authorized agents.

M-Pesa operates via SMS phone messaging and offers the ability to make deposits and send and receive payments to people and businesses – potentially an attractive prospect to the third of Romanians who don’t have access to formal banking services. Across the country there are about 7 million people who transact mainly in cash. The just-launched mobile service is estimated to be accessible to about 6 million people, and Vodafone plans to increase its in-country distribution points to a total of 2,000 by the end of the year. Vodafone has 8.3 million clients out of Romania’s 21.3 million population, the vast majority being active mobile phone users. The mobile money market in Romania is currently underdeveloped.

Of course, just because M-Pesa has achieved significant uptake elsewhere doesn’t mean that will happen here, too. Since the service first launched in Kenya, new M-Pesa outfits have been established in a number of other countries including Tanzania, Afghanistan, and South Africa. Within the past twelve months, the service also launched in Egypt, India, Lesotho, and Mozambique. Across these markets results have been mixed, with operators struggling to emulate the immense success achieved in Kenya.

For example, 14 months after M-Pesa was launched in Kenya, it had 2.7 million users. By the end of the same initial launch period, the service in Tanzania had 280,000 users. In a report from the IFC released several years later examining potential factors behind Tanzania’s lagging progress, issues that were cited included a lack of customer education and financial literacy (reinforced by the lower levels of formal financial access in Tanzania to Kenya), the telco’s limited market share (Vodacom had 41 percent of the market in Tanzania to Safaricom’s 79 percent in Kenya), competition in the mobile money space, regulatory challenges, and a dispersed population challenging for efficient agent networks. M-Pesa in Tanzania has since rolled-out several services advances, such as more-targeted education-based marketing campaigns, new services, and improved management of its distribution network. As of the middle of last year, M-Pesa in Tanzania now has roughly 5 million subscribers, compared to 17 million in Kenya.

In Romania Vodafone may face struggles similar to those in Tanzania, as a result of Vodafone’s limited market share and mobile money services competition. Vodafone Romania’s biggest competitor and the market’s leading mobile operator, Orange, has already delved into mobile money in other countries (“Orange Money” is offered in 12 out of Orange’s 25 countries, all in Africa) as well as into international remittances services between customers in different countries. This latter service is of particular interest for the new Romanian mobile money market. Romania receives the third-largest amount of international remittances in the Europe and Central Asia region, $3.6 billion in 2013. A spokesperson for Vodafone has indicated that the carrier is looking into enabling Romanian M-Pesa accounts to be able to receive international remittances, which is possible in other M-Pesa markets.

We look forward to watching the Romanian mobile money market develop and seeing if M-Pesa expands further within Europe.

Our own Adriana Magdas will soon be going home to Romania to see her grandmother. We’ll be sure to ask her to test M-Pesa for us.

Image credit: Urban Deguerreotype

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