Mobile money in Africa is growing as new markets open up

At TechCabal’s Future of Commerce event, held on September 23, a roundtable was held to discuss the impact of mobile money on payments and commerce in Africa.

There, Damilare Dosunmu, editor at TechCabal and panel moderator, asked Fawzia Ali-Kimanthi, Acting Director of Safaricom Consumer Business Officer, what could happen to the mobile money market in East Africa if Vaguewhich disrupted the mobile money space in French-speaking Africa with its low-cost services, was to compete with Safaricom’s M-PESA, which can be quite expensive.

Ali-Kimanthi burst out laughing. The question was tricky. M-PESA dominates the Kenyan mobile money market, powering 98% of mobile money transactions in a pro-cashless population of over 53 million people. But what happens when they face a competitor that is not local and is a cheaper alternative?

Ali-Kimanthi answered the question with a promise for Kenyans: M-PESA is working to reduce the cost of mobile money credit services. Speaking about a possible entry into Wave, she said M-PESA was ready to take on big competitors as it would help them innovate and improve their products.

The influence of M-PESA, Wave and relatively newer players like MTN in the African mobile money market has driven the growth of mobile money in Africa to unprecedented levels. Currently, transactions in sub-Saharan Africa account for nearly 70% of the $1 trillion in mobile money transactions globally. The region grew 40% year-on-year to land its $697.7 billion in payments processed, far ahead of East Asia and South Asia ($156.3 billion), other regions where mobile money penetration is leading.

While this expansion is laudable, the benefits of mobile money expansion in Africa go beyond payments. In Africa, mobile money is doing what traditional banks have been unable to do in their decades of existence: inspiring people, despite their lack of education or low remuneration, to embrace life digital and to subscribe to digital financial services.

This change in lifestyle continues to impact the continent in many ways, one of which relates to the efficiency of small businesses. The use of digitized mobile payments has enabled faster transactions between small businesses and their customers, creating a pro-digital business environment in local African contexts.

To corroborate this, a GSMA reportwho investigated the global penetration of mobile money, said: “Cash, cash and person-to-person (P2P) payments still account for most of the value, but more people in LMICs [low and middle-income countries] increasingly live digitally thanks to mobile money.

Does Nigeria hold the key to Africa’s mobile money revolution?

The GSMA report mentioned earlier also predicts further growth in mobile money penetration in countries where mobile money operations are still nascent, such as Nigeria (where telcos are just beginning to make inroads). in mobile money services) and Ethiopia (where M-Pesa was recently licensed to operate).

Nika Naghavi, Executive Director of MFS Africa, Mobile Network Operators, who was also on the FOC panel, expressed her agreement with the GSMA on a possible explosion of mobile money operations in Nigeria. According to her, the entry of telecom operators like MTN and Airtel into the Nigerian mobile money market is the next big mobile money trend on the African continent.

“The adoption of mobile money in Nigeria through MTN and Airtel will change the landscape and introduce innovative services and partnerships that will differ from what we have seen so far,” she said.

“Nigeria has the largest unbanked population in Africa, and while its payments industry has flourished, there are virtually no major players financing the unbanked in a sustainable way. This is where mobile money comes in,” she added.

Naghavi’s argument highlighted the fact that 60% of Nigeria’s unbanked population uses mobile phones and is already connected to major telecom operators. Additionally, MTN and Airtel have been in the West African country long enough to understand their user behaviors meaningfully. Thus, their networks, data, experience and wide national reach position them as capable drivers of a mobile money revolution in the country and on the continent.

Ali-Kimanthi, who works with M-PESA, a telco-led mobile money player, was optimistic about the prospect of telcos pushing mobile money in Nigeria.

“With what we have seen in Kenya, I can predict an explosion in mobile money operations in Nigeria, and that will fuel the industries,” she said.

Amid the hype surrounding the Nigerian mobile money market, we need to remember some of the reasons why products like M-PESA have taken off nationwide in Kenya. Apart from the telecom push, a key factor is that mobile money operations in the region have been innovated to include credit facilities. This is not the case in Nigeria now, but there is no reason why it should not be so in the future.

M-PESA’s model proves that financial products, such as credit and even insurance, can be integrated into mobile money operations. That’s what it really means to bank the unbanked, to create an ecosystem that extends a suite of financial services to the financially excluded rather than just providing them with digital means to transfer money. This could, in fact, be the key to the mobile money revolution we want to see in Africa.

Additionally, Nigeria’s mobile money space is flooded with many private fintechs, such as Paga and Moniepoint, all of which compete with many traditional banks that have taken the market by storm over the past decade. If telecom operators change the rules of the game as Naghavi predicted, they will have to herald the paradigm shift in mobile money operations by outperforming existing competitors and giving Nigerians a real taste of the financial inclusiveness.

Africa may be the king of mobile money, but there are still wars to be won

The reality that more 800 million Africans are still not connected to the internet represents a challenge for mobile money operators across the continent. It is becoming clear that innovation in the sector must include Africans without smartphone access. USSD services offer a great option here as they bypass the existing internet problem for Africans in rural areas.

Another thing operators need to pay attention to is how, instead of cash, digital payments can be crowned kings on the streets of Africa. In Kenya, arguably Africa’s largest mobile money market, 90% of transactions are still conducted in cash, revealing an untapped market on the continent that could be 10 times the numbers Africa sees in mobile money transactions. money.

Compounding these problems are African governments’ stifling regulations on mobile money services on the continent. Across Africa, mobile money customers and providers are having to bear the brunt of costly compliance with government rent-seeking policies. In Ghana, it was a 1.75% tax on digital transactions called “e-levy”. The Cameroonian government has set its own at 0.2% for money transfers and withdrawals from mobile money solutions. Both samples were critical by mobile money users, but they are still in place, and mobile money services are suffering.

Esigie Aguele, co-founder and CEO of Qore ID, an identity verification company, contributed to TechCabal’s FOC roundtable, highlighting the need for standard verification processes and strategic partnerships in Africa’s race to revolutionize mobile money.

“Mobile money will expand financial inclusion and open up the market for many African businesses, but it is imperative that operators ensure that their customers are who they say they are, and that is where companies like ours nurture the ecosystem,” he said. .

“Strategic partnerships are also very important for the future of mobile money services on the continent. Banks, fintechs and even telecom operators can find common ground to partner up and develop innovative products for African users,” Aguele added.

Trade in Africa is taking shape. While products like BNPL and drone logistics may be the next frontiers, the truth remains that mobile money penetration, adoption and innovation hold the key to radically transforming commerce on the continent.

When mobile money reaches innovation peaks, we will see an Africa where a rural woman farmer can, from the comfort of her bed or barn, access mobile payments, digital transfers, insurance, credit and even to investment opportunities with the use of his phone. , and with or without Internet access. This is possible in Africa, and our position as the world leader in mobile money transactions proves that we can show the world what can happen when mobile money services face real disruption.