Last weekend, many people's lives in the country slowed to an almost halt, financially speaking, after Safaricom's M-PESA mobile money transfer services collapsed for close to 24 hours to Sunday evening. The biggest mobile money service by market share went offline on Saturday night leaving millions of customers stranded all day Sunday.

 i) Agents

According to statistics from the Communications Commission of Kenya (CCK), the mobile money sector has continued to create employment and become a dependable source of income for many. The biggest of this lot is the agent group.  4th quarter statistics by CCK show that there at the end of the quarter (September) there were 49,079 active mobile money transfer service agents compared to 45,861 recorded in April. This represented a quarterly and an annual growth in number of agents by 7.02% and 15.99% respectively.

M-PESA agents woke up on Sunday morning and had to go the whole day without work and some of them who spoke to the media complained of huge losses owing to the outage. If a few hours of the outage can cause huge losses, then a complete fail of the systems will not only cause losses in revenue generated, but will render a good number of the 49, 079 agents jobless.

ii) Customers

This is the biggest group that was affected by the temporal outage of the M-PESA system. Dates were cancelled, people went hungry, medication could not be bought, people quarrelled  travel plans were cancelled, bookings could not be paid for, utilities were not paid on time and the weekend could generally not be enjoyed. Reason, dependants could not move money from point A to B, because something unexpected happened, without warning.

The CCK 4th quarter results indicate that total deposits handled during the period were KES 192.73 billion. The annual growth in the total deposits grew by 38.1% from KES 486.84 billion deposited in the FY 2010/11 to KES 672.30 billion deposited during the FY 2011/12. CCK noted in a statement that the upward trend signified that mobile money transfer service has become instrumental in providing the unmet demand for financial services thereby promoting financial inclusion in the country.

This in essence means that many people will be locked out of financial services or be forced to make do with less convenient slower options than what mobile money transfer has afforded them. The amounts in billions of deposits trusted to the telcos could be counted as losses if the system failed completely.

iii) The Companies

The companies will lose revenues, growth platforms and billions in suits and court

What happens if Your Money is Lost?

Mobile money services are constituded as deposit taking services and therefore cannot fit into the definition of banking in terms of taking deposits and engaging deposits to make money from it. Therefore, the laws surrounding mobile money operations are not the same as those that govern mainstream banking institution. And so does the risk that come with it based on the legislation and regulation from the Central Bank of Kenya.

According to a research titled Security Issues in M-Banking  by Fanon Ananda -MscIT and John Kiptum (CISM,CISA) with the case study of M-PESA noted that there are a few security issues that have not been addressed by mobile money platforms and industry regulators.

The Banking Law [Sec. 2(1)] defines business as the acceptance of money from the public on deposit or on current account AND the use of this money by lending, investment or any other manner for the account and at the risk of the person so employing the money.

The research points out that by virtue Safaricom not using M-PESA deposits to earn or accrue any benefits, it exonerates itself from engaging in banking business? Funds collected from M-PESA account holders are held by M-PESA Trust Company Limited in a pooled account with the Commercial Bank of  Africa (CBA). The interest earned on the same does not accrue to or benefit Safaricom Limited. Airtel Money, (formerly ZAP) was done in partnership with Citigroup and Standard Chartered Bank.  Equity Bank partnered with YU Cash as well as Orange Money.

The questions that still remain unanswered are;

i) Who will compensate customers in case a mobile platform collapsed? The operator, CCK or Central Bank of Kenya?

ii) If there is a system in place to repay the millions of the mobile money users across in the 4 networks, what mode will be used to repay them since the system they were on collapsed?

iii) How are the operators prepared for server security issues to safeguard subscriber's money.

Keep it Pesatalk as we try to find answers to these essential questions in our subsequent articles.