It was inevitable that at some point this year that cross-border mobile money interoperability would become possible in East Africa given its runaway success in countries like Kenya, Uganda and Tanzania. In fact, I wrote a blog post about Tanzania being the first country in East Africa so far where mobile networks had made their mobile money offerings interoperable a couple of weeks ago. Therefore, it probably makes sense that Kenya’s Safaricom and Tanzania’s Vodacom, being dominant for mobile money services in their respective markets, are the first to pull it off as announced today in a press release I received earlier today from Vodacom Tanzania.

Its a well known fact that M-Pesa is a mobile money service that was developed and deployed by the UK’s Vodafone which is also a major shareholder in Kenya’s Safaricom and Tanzania’s Vodacom. This probably means that both mobile networks are running off the same M-Pesa platform(s) which makes it reasonably straightforward to make their M-Pesa offerings interoperable. This is a pretty massive initiative given that Safaricom has over 18 million M-Pesa subscribers whereas Vodacom has over 7 million M-Pesa subscribers.

According to the Vodacom Tanzania press release, the ability for their subscribers to send M-Pesa to Safaricom subscribers is similar to how they already do so nationally. The only difference is that a Vodacom Tanzania customer will choose option 3 – send money to M-Pesa Kenya – and enter the mobile number beginning with the +254 prefix. Even before the money is sent, the Vodacom Tanzania customer will be shown the Kenyan Shillings equivalent value of the money that the Safaricom customer in Kenya will receive. The Tanzania Shilling to Kenya Shilling currency conversion will happen immediately and the money will be available instantly via Safaricom’s M-Pesa in Kenya.

In order for a Safaricom M-Pesa subscriber to send money to a Vodacom Tanzania mobile number, all they need to do is use PAYBILL number 255255 and then enter the designated Vodacom mobile number as the account number to send. Its that simple. Safaricom M-Pesa subscribers are being charged 1% of the value of the transaction plus an exchange rate fee.

The combined M-Pesa agent network for Safaricom in Kenya and Vodacom in Tanzania is a massive 150,000. At the same time, Safaricom has over 80% market share for mobile money services in Kenya whilst Vodacom has over 65% market share for mobile money services in Tanzania. I suspect that given the large number of Kenyan Diaspora living and working in Tanzania, the cross-border M-Pesa service will be hugely popular for them sending money back home. In addition, this could open up a whole range of interesting possibilities for regional trade whereby money can be safely and instantly transacted between Kenya and Tanzania. This could easily disrupt MoneyGram and Western Union going forward.