Kenya’s mobile wallet tech expands to Eastern Europe by Erik Heinrich @FortuneMagazine May 9, 2014, 1:29 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE — Nairobi’s M-Pesa, a mobile payments service that allows money to be deposited, withdrawn, and transferred using a phone, is credited with transforming tens of millions of lives in Africa by making financial services available to people not served by the conventional banking system, from the Masai Mara to Lesotho. Now the world’s most successful mobile wallet technology is expanding beyond Africa to Europe, starting with Romania. In what may be a historical first, the move involves the export of a technology from the developing to the developed world, reversing a centuries-old trend. “So far, M-Pesa has found success in similar markets that have relatively low smartphone adoption, less access to financial services and credit cards, and that are predominantly prepaid,” says Jack Kent, a mobile analyst for IHS Technology in London. In Central and Eastern Europe, he says, credit card penetration is below 20 percent and prepaid mobile plans are used by 70 percent of subscribers. M-Pesa, based on a simple text messaging technology developed by Vodafone at Kenya’s biggest mobile network operator Safaricom, will allow Vodafone Romania’s customers to make cash deposits and withdrawals from participating agents, pay utility bills and purchase everyday items such as newspapers, coffee and flowers. “The majority of people in Romania have at least one mobile device, but more than one third of the population do not have access to conventional banking,” Michael Joseph, Vodafone’s director of mobile money, said in explaining his company’s decision to launch in that country. MORE: In Egypt, high hopes for mobile wallets London-based Vodafone has not disclosed where in Europe it plans to introduce M-Pesa after Romania, where initially the service became available to about six million people. However the global telecoms giant, which has operations in 30 countries and partners with networks in over 50 others, has a footprint that covers most of the European continent. “It makes sense that Vodafone would bring M-Pesa to countries in Central and Eastern Europe,” says Kent at IHS Technology. “Should the Romanian launch prove successful, I’d expect Vodafone to expand in territories such as Albania and Turkey.” Vodafone also has divisions in the Czech Republic and Hungary, and with partners it operates in countries such as Serbia, Poland, Ukraine, and Russia. But it remains to be seen if Vodafone’s M-Pesa can repeat in Europe the stellar success it has experienced on its home turf of Kenya. The mobile money platform accounted for nearly $22 billion in transaction, or about 60 percent of Kenya’s gross domestic product, in 2013. “M-Pesa certainly hit a home run the first time at bat in Kenya,” says Will Hahn, a telecommunications and media analyst for Gartner. “Subsequent implementations have been successful, but not on that level.” MORE: What if America’s unbanked had mobile wallets? For example, Vodafone entered into a partnership with South Africa’s Nedbank in 2010 to bring M-Pesa to some 13 million people who are economically active but lack a bank account. Vodafone planned to sign up 10 million users in the first three years; after almost two years, it has only slightly more than 100,000 subscribers. The reason for such slow adoption, analysts say, is that a stricter and more litigious regulatory environment in South Africa did not allow M-Pesa to take flight in the same way it has in East Africa. “The former Soviet states, Russia, and Eastern Europe mainly fall in the zone between a Kenya and a South Africa,” Gartner’s Hahn says. As for Western Europe, most analysts are skeptical about M-Pesa’s chances of grabbing market share in countries such as the U.K., Germany and France. Despite the fact that M-Pesa is more advanced than comparable offerings, consumers in these countries already have access to a wide range of mature financial services. Still, M-Pesa might find an important niche in Western Europe among the millions of expatriates and immigrants from sub-Saharan African who want to send money home quickly and cheaply. “The opportunity is especially important in countries like the U.K. and France where there are many immigrants from Africa,” says Omar Maher, an analyst for the Cairo-based investment bank EFG-Hermes. The first test of that hypothesis comes in Romania.