Kenyans will from today be able to send and receive money to UK through Safaricom's M-pesa in the company's first commercial cross-border transfer service whose details will be announced later on Tuesday.

The move opens up the service --which has contributed to the slow decline in usage of more traditional money transfer solutions -- to the lucrative remittances market and sets the stage for a new battle on the international front between local mobile operators.

Safaricom's competitor in the market, Zain, just under a month ago, unveiled a service that allows subscribers to send or receive money anywhere in the world using the Zap platform.

Safaricom has been actively pursuing a link with its UK affiliate, Vodafone, to allow subscribers on its network to send virtual cash across borders since it launched the service over two years ago.

According to sources involved in trials for the service launched in 2008, the proposed rates for an M-pesa transaction between Kenya and Uganda are Sh480 (£4) for amounts between Sh0-18,000 and Sh720 (£6) for amounts between Sh18,120 and Sh30,000 (£151 - £250).

The rapid adoption and frequent use of M-pesa has translated to Safaricom emerging as the local market leader in mobile money transfers, mostly due to its low pricing model and the fact that it is available on the mobile phone.

M-pesa now has more than seven million users and boasts an agent network that exceeds the total number of bank branches in the country.

"By allowing money to flow electronically rather than physically, M-pesa lessens, and in some cases eliminates, many of the spatial and temporal barriers to money transfer. This releases money flows in Kenya and allows such flows to penetrate rural areas where cash is difficult to access," said Olga Morawczynski, in a CGAP research note.

Another pillar in the product's success has been the fact that users do not need a bank account to use the service, a fact that Safaricom chief executive, Michael Joseph, says has pushed the product to prominence.

The market will be keen to see if the product will have the same success in the international market, where money transfers are typically expensive and out of the reach of the unbanked population.

Analysts say the fact that international transfers is a new and untapped market, the entry of mobile providers could set the stage for price battles in the industry.

"Apart from the convenience factor, unless prices come down to comparable levels -- or at least somewhat closer to the cost of sending money domestically -- there is still a long way to go before the potential of international mobile money transfers can be realised," said Sanket Mohapatra of the World Bank.

Mobile firms have turned to borderless mobile money transfers as the next frontier in the industry's development in the last month, hoping to cash in on the lucrative remittances market.

The Central Bank of Kenya last month said remittances totalled $611 million in 2008, up from $573 million in 2007 and are set to continue rising this year.

More than half of remittances have come from North America and Europe in each of the past five years.

"Our survey shows a general downward trend in remittances flow between January and June 2009, and an upward trend in the next two months," said Charles Gitari Koori, Director Research Department of the CBK.

In August remittances inflow increased by 11.1 per cent to $55 million from $50 million in July.

Tapping into this inflow is likely to provide mobile operators with a new source of income in an attempt to diversify products as revenues from traditional activities decline in line with a more competitive environment and economic conditions.

Safaricom's latest move indicates it has surpassed yet another regulatory test.

Analysts say cross-border transactions are likely to refresh debate on how the movement of money is managed in the developed world, where regulatory issues have held back the launch of the service for over a year and a half.

By May of this year, Safaricom was still trying to get a formal go-ahead for the service from CBK, nearly two years after launching the trials.

Today's launch indicates the firm has satisfied both British and Kenyan authorities that the service is not prone to money laundering and satisfies the know-your-customer-rules which enable authorities to track transactions.

In an earlier interview with Business Daily, Pauline Vaughan, the M-pesa Product Manager, said trial participants in UK were able to send money to Kenyan phone numbers via a web interface; thereafter being able to collect their cash from about 10 outlets.

Safaricom's is a different model than that employed by Zain, which has opted to leverage banking relationships to create a borderless mobile money transfer solution.

Launched in late September, Zain's service allows users to receive money from anywhere in the world directly to their mobile handsets as well as send funds directly to their bank accounts.

To roll out the service, Zain is relying heavily on the banking industry, through its partnership with Standard Chartered and Citigroup, which processes transactions using existing relationships with banks all over the world.

In order to operate the new service, Zain pools funds in an account held at Standard Chartered under the name Zap Trust Company.

It is into this account that any deposits or withdrawals between banks are made before the Zap system forwards the virtual money to a Zain subscriber on their Zap accounts.

"The product brings together the security of traditional banking infrastructure with the convenience of the mobile phone," said George Held, the Products and Innovation Director at Zain Group.

Zain is still working out regulatory issues such as how much can be transferred through the service, which is active within East Africa, on a country-to-country basis.