To 28-year-old Kenyan Mary Wanjiku, her cell phone is not just a cell phone. It is also a cheap, safe and easy way of sending her mother $40.

But by using it to ping cash to friends and family she and millions of Africans are joining Japan in breaking a technology barrier that remains in Europe and the United States, and paving the way to what could be the cash of the future.

Before, I would be forced to make the journey home to deliver the money, Wanjiku said outside a Nairobi shop that doubles as an agent for M-PESA, the virtual cash network that means 'mobile money' in Swahili, Kenya's lingua franca.

M-PESA has revolutionized my life.

The network, owned by Kenya's biggest mobile phone firm Safaricom, has its roots in Africa's lack of infrastructure -- particularly bank branches -- and the enthusiasm with which people have taken to mobile phones.

Only one in five people have bank accounts, mainly because of the prohibitive cost to the banks of operating branches in far-flung parts of a continent where many of the population of one billion live on a few dollars a day or less.

But mobile phones are spreading extremely fast: to 270 million in 2007 from just 50 million in 2003, according to industry association GSMA.

Teaming up with Kenya Commercial Bank to let phone users who do not have bank accounts send each other money, M-PESA hit on a formula that has attracted 6.5 million customers, or one in six Kenyans, in just over two years.

In Japan, which has pioneered the technology and business models toward wallet phones, about 55 million mobile phones have an e-money function, so about half of Japanese users carry them.

The global market for mobile money is growing at 70 percent a year and should attain 'mainstream' status by 2012 with more than 190 million customers, or more than three percent of mobile users, IT consultancy Gartner said in a May report.

Other phone companies such as South Africa's MTN -- the continent's biggest operator -- and Kuwait's Zain are piling in with similar services in a slew of countries including South Africa and Nigeria, and have pilot schemes stretching from the Middle East to Afghanistan.

Mobile handsets are in an excellent position to become the primary digital channel for providers of banking and related financial services in emerging markets, Berg Insight analyst Marcus Persson said.

In much of Europe and the United States access to fast Internet connections -- enabling online banking -- has been a brake on mobile money, but Berg Insight expects it to catch on as wireless technologies such as Bluetooth spread.

MOBILE WALLET

The scope of the African systems has grown quickly from simple cash transfers by text message to payments for everything from a taxi ride to a utility bill, and it is possible to spend a day in Nairobi without carrying any cash.

This is just the beginning, Safaricom chief executive Michael Joseph told Reuters. What you are moving toward is a person going out without cash in his pocket.

The cost of building and administering a network of 9,000 trustworthy agents to carry the cash that must be paid at the end of the chain means it has yet to make a profit, Joseph said.

But beyond simple profit, Zain Africa chief executive Chris Gabriel said the real value of mobile cash to phone firms lies in securing a long-term connection with customers as cut-throat competition in the mobile market eats into revenues.

We see it as a tool to create stickiness, Gabriel said. Yes, it's a revenue service but at the cost of an SMS, you're not going to get rich quickly.

Zain and Safaricom, part-owned by Britain's Vodafone, can also handle cross-border transfers, allowing them to tilt for a slice of global remittance flows, worth over $380 billion in 2008, according to the London-based International Association of Money Transfer Networks.

GRASSROOTS GROWTH

Cell phone cash has already gone deep into Kenya.

Companies such as tea or coffee plantation owners are finding they can pay staff salaries via mobile phone and charities can receive and distribute aid, as the Red Cross did during the violence after Kenya's 2007 elections.

Although the phenomenon is young, the World Bank in Africa has labeled it a cornerstone for development for its potential to mobilize remote rural economies.

University of Edinburgh researcher Olga Morawczynski said villages were getting up to 30 percent more in remittances due to M-PESA, allowing farmers to diversify out of subsistence agriculture into small businesses such as furniture making or running a small roadside kiosk.

It's allowed money to penetrate more easily into rural areas where it's really needed, Morawczynski told Reuters.

Despite occasional tensions with the phone firms, most banks know they cannot compete on their own and so are happy to provide the cash float for the systems in the belief that in the long-term they are opening up a channel to potential customers.

It's partly a question of education, said Ravind Ramanah, head of marketing, emerging markets, at BNP Paribas, France Telecom's partner in its Orange Money service now piloting in Ivory Coast.

We believe a portion of clients will start with the basic banking service via mobile, and once they are used to that they will move to a normal bank account, Ramanah said.

There is no question, however, who is in charge.

We're treading ground that's never been trodden before, Safaricom's Joseph said. It's going to be introduced into other countries in the years ahead, and banks may have to change their working model in order to work with us.

(Additional reporting by Tarmo Virki in Helsinki and Sachi Izumi in Tokyo; Editing by Sara Ledwith)

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