* Mobile banking in Africa to hit $22 bln by 2015-consultant
* Network-agnostic startups seek to gain an edge
* Remittance flows could get tapped
By Simon Akam
FREETOWN, Jan 26 Remigius Okafor's hair-care products distributors used to risk theft by carrying thousands of dollars into Sierra Leone's ramshackle capital to pay him for supplies.
But now the majority pay him with their cellphones, using one of a variety of mobile banking technologies that are competing for a rapidly growing African market.
"It is very, very convenient," Okafor said, sitting at the back of a tunnel-like store hung with weaves and other hair extensions. "The agent is happy because he finds it difficult to waste a whole day at the bank."
Mobile banking is expected to grow into a $22 billion industry across Africa by 2015 on the back of skyrocketing cellphone use and growing demand for financial services, according to consultancy Juniper Research.
But the competition for that market could prove messy in the coming years, pitting a fragmented field of network operators against each other, and all of them against a new breed of mobile banking company that seeks to be network agnostic, which means customers are not tied to one phone network.
"Where we'll end up will ultimately be driven by a mixture of regulation and market forces," said Leon Isaacs, CEO of consultancy Developing Markets Associates. Getting there "will be a painful process," he said.
Early successes include Safaricom's (SCOM.NR) M-PESA mobile banking service in Kenya. Launched in 2007, the service - which can only send money from a Safaricom SIM - now has over 10 million users and transfers about $350 million per month.
But analysts say the M-PESA model, while impressive, may not translate elsewhere in Africa where a more competitive landscape of cellphone networks in many countries may make a network-agnostic approach more suitable.
Regulators in Nigeria, Africa's most populous country, for example, have already decided that mobile money services in the country must be interoperable.
But in Sierra Leone, in a possible indication of the future of the sector, a battle is emerging between network-specific and network-agnostic banking services.
The Bharti Airtel Ltd (BRTI.BO) Airtel Money service used by Okafor and his distributors has only 215,000 registered subscribers and has yet to turn a profit.
British former management consultant Ben Farren believes the network-agnostic Splash service, which he launched in 2009, is more suitable for local conditions.
"It's a drastically better offer to the consumer," he said. "They should be able to transact with anybody, regardless of what network they're on."
The Splash operation has only garnered 70,000 subscribers so far, but Farren is bullish.
The International Telecommunications Union estimates mobile subscriptions across Africa more than tripled to 333 million since 2005. The World Bank said Sub-Saharan Africa averages just 163 bank accounts per 1,000 adults -- compared to an average 635 in developing countries.
South Africa's Wizzit is another start-up. Its operations are guaranteed by the South African Bank of Athens (NBGr.AT). Managing Director Brian Richardson will not disclose the number of subscribers, but says the operation turns a profit.
"I do believe the bank-led model will win at the end of the day," he explained. "The more successful the networks are in the banking space the tighter the regulatory noose will be around their necks."
For consultant Michele Scanlon the low margins in the industry mean small start-ups may struggle. She envisages a hybrid model between banks and networks, both of which have deeper pockets.
"The banks bring the compliance, but the banks aren't innovative enough," she said. "The operators have the customer base and a wide distributor base."
In the end though it may be the vast international remittance market - worth some $400 billion per year - that decides which option is eventually most successful.
Isaacs believes that cross-network approaches will have a clear advantage in the field, as otherwise money transfer companies like Western Union (WU.N) would have to partner with a large number of proprietary operators in Africa to disburse funds.
"The network-agnostic, or the interoperable, is going to be much better," he said. "They'll be able to get the money everywhere through one pipe." (Editing by Richard Valdmanis and Jane Merriman)