During a recent workshop at the M-banking conference in Cairo, Egypt, a number of practitioners and interested parties discussed the state of mobile banking or-more properly-mobile transactions. One of the interesting insights that emerged comes from the experience of the Vodafone company Safaricom in Kenya with its M-PESA mobile transaction service.

Launched in March, 2007, the service has been an astounding success, reaching 2 million customers by May of 2008. New field research by Olga Morawczynski on use of M-PESA's by low-income customers in the Kibera slum of Nairobi-now posted in our resources section-sheds some light on both the how and why.

The dominant use of M-PESA by Kibera residents is to transfer money home to their native rural villages, underscoring the importance of internal remittances in virtually all developing countries. A user registers with an M-PESA agent, who establishes an electronic account for the customer. The customer then gives the agent cash which is deposited into account as e-money, and can then be transferred to anyone with a mobile phone.

It turns out that users don't really trust the agents and often complain about delays in the money being credited to their account. But they do trust Safaricom, the largest mobile provider in Kenya, to keep their money safe (an important factor in growing the m-banking market) -and thus are willing to use the system. Over 9 billion Kenya Shillings (about $73 million) of person-to-person transfers have been processed by M-PESA. Brand strength-based on years of service-is thus key to introducing new services such as mobile transactions.

A second insight from the research is that M-PESA is competing successfully with more traditional means of remittances. Many users say the service is faster, safer-less chance of theft or "lost" money-and could be sent directly to their home village. The service may even be altering urban-rural relationships to some extent-one user said he no longer needed to go home to visit his mother as often, because he could send money by phone.

Safaricom finds that use of M-PESA for savings, bill payments, and other M-banking services is slower to catch on, reflecting in part the lack of knowledge of financial services among low-income customers. But they plan to gradually educate their growing customer base and migrate them from remittances to a broader set of services.