Send a money order from your cellphone

Vodafone plans to announce a partnership today with Western Union to allow international money transfers via cellphones. The companies are initially launching a pilot program that will allow residents of Reading in the United Kingdom to send money to family members and friends in Kenya, where Vodafone is the 40% owner of local wireless operator Safaricom. If that program is successful, the companies will expand it to other countries.

There is growing interest in using cellphones as a conduit for money transfers, with financial institutions such as Citigroup and Visa taking steps into the business, along with Silicon Valley start-up Obopay Inc. Wireless carriers in the US and in emerging markets such as India and the Philippines are having some success with programs that let users transfer money domestically via cellphones.

Now UK-based Vodafone and other wireless operators have set their sights on cross-border remittances. Research firm Aite Group expects that by 2010 global workers' remittances will amount to $465 billion, up from $369 billion last year. Remittances are a big contributor to gross domestic product in many emerging markets as workers migrate around the globe, maintaining ties to family in their native countries. Most of these transfers are in the range of $300 to $350 and happen a few times a month, but Vodafone wants to encourage much smaller and more frequent money transfers via cellphone.

Vodafone, which owns or has stakes in wireless operators in Africa, the Middle East and India, sees mobile money transfers as an attractive add-on service in markets where users generally just buy prepaid phone minutes.

The company's international remittance service builds on its domestic money-transfer business, which it started in Kenya last year and has since expanded to Tanzania and Afghanistan. That service, known as M-Pesa ("cash" in Swahili), has signed up more than four million customers -- often urban workers who use it to ship money to relatives in rural areas. Senders can visit any of 4,000 locations, including Safaricom retail outlets and gas stations, to hand over cash that gets deposited into their phone accounts, and then send it via text message. Recipients go to another M-Pesa location to pick up the cash.

Expanding the service to allow cross-border transfers through Western Union agents allows Vodafone to not only increase the volume of cash it is handling, but also move into a higher-margin business: It charges only 18 US cents for domestic money transfers in Kenya, but the charge for international remittances from the UK will be $7.22 or more.

Western Union, which processed $64 billion in cross-border remittances last year and has 365,000 agent locations in 200 countries, is hoping to expand its reach through cellphones. Western Union is partnering with other carriers for international money transfers, including Globe Telecom and Smart Communications in the Philippines, Cairo-based Orascom Telecom Holding, and Bharti Airtel of India.

Obopay, based in Redwood City, Calif., offers domestic money-transfer services in the US and India. Users set up a PayPal-like account online, and then send money via text message, mobile Web browser or specialized software applications they download onto their phone. They can withdraw money from their cellphone accounts using special Obopay debit cards at automatic-teller machines. Obopay is trying out a service with Citibank that allows users to link their existing bank accounts directly to their cellphones, so it is easier to send and withdraw money.

In India, Obopay plans to link mobile money transfers to electronic-payment services, so consumers can refill their prepaid phone minutes or pay their utility bills. (info from The Wall Street Journal)