Sub-Saharan Africa is a clear leader in mobile money, with transactions reaching $19.9 billion in 2017 – 63 percent of the global figure.
A report by the Global System for Mobile Communications (GSMA) found that the global mobile money industry processed $1 billion each day in transactions and generated direct revenue of over $2.4 billion.
But what impact has mobile money had in Africa since the 2007 launch of M-Pesa by Kenyan operator Safaricom set off a wave of similar products across the continent?
“Before the launch of mobile money services, many countries in Africa had large numbers of unbanked populations. This has greatly improved with the launch of mobile money services as people can now open wallets through which they can access a range of financial services,” says Danson Njue, a research analyst at Ovum.
Mobile transaction services such as M-Pesa have also created many direct and indirect employment opportunities on the continent.
“Mobile money service providers have recruited hundreds of thousands of network agents to facilitate the delivery of services to end users. Mobile money services are used to facilitate both bulk and merchant payments, hence promoting business growth. Governments have benefited from increased taxes from increased use of mobile money services,” Njue said.
One of the most interesting findings of the GSMA report was that mobile transaction services continue to spread across the continent, beyond traditional footholds like Kenya.
Western and Central Africa are the fastest growing regions, with Cameroon, Ghana and Ivory Coast the markets developing most quickly.
Yet it hasn’t caught on everywhere. In South Africa mobile money has proven an outright failure, with Vodacom shutting down M-Pesa in the country in 2016.
Njue said whether mobile money was a success in a particular market depended on a variety of factors, including market dynamics, regulation and awareness.
“Some markets tend to replicate successful mobile money models from others markets without understanding the actual customer needs in those markets. This copy-and-paste has led to the service being quite unsuccessful in certain markets,” he said.
“In addition, mobile money services require constant customer awareness to educate users on benefits and risks. Others markets have strict regulatory regimes which requires mobile money service providers to obtain banking licenses on top of other core operating licenses. This discourages growth and innovation in the sector.”
Vahid Monadjem is CEO of South African company Nomanini, which uses handheld point of sale (PoS) devices to enable informal vendors to sell a variety of services, including account top-ups.
He said the success of payment systems depends on two sides accepting mobile money: agents and consumers.
“Growing each side is itself hard. It can be a tough sell convincing consumers to adopt a new type of money, such as overcoming concerns over security or understanding the abstracted nature of the service. Acquiring agents and building a system to manage their liquidity is equally difficult,” he said.
Compounding the issue, according to Monadjem, is that the two sides have to be built simultaneously.
“Mobile money without a link to physical value such as agent networks is unusable, and agents will quickly stop accepting mobile money if there is no demand for it. Furthermore, each country is different. The need and perceptions of the consumers can be different, as is the infrastructure to create agent networks. P2P payments was a viable use case in Kenya, but already covered by banks in South Africa when mobile money launched there,” he said.
The GSMA highlighted various trends in the mobile cash space, such as increased bank-to-wallet interoperability, growing smartphone penetration, and a renewed push to reach the underserved.
Monadjem said there was a growing number of services being built on top of mobile money networks to increase their impact.
“Already traditional financial services, such as savings, loans and insurance for consumers, are being added to more advanced mobile money deployments. In addition, new business cases that were not viable without mobile much, such as prepaid solar power companies, are emerging,” he said.
Njue agreed the sector is evolving from P2P money transfers to more integrated services around payments, savings and microloans, and microinsurance.
“This is aimed at promoting the use of the service to generate new revenue for service providers. In the era of digital transformation, many telecoms are using mobile money to monetise other digital services in their operations,” he said.
“In addition, service providers are now gearing towards mobile money interoperability to support international remittances and cross-border transfers and payments.”
Interoperability – the ability of, say, a Kenyan Airtel subscriber to send money to a Safaricom subscriber, or a mobile money user in Tanzania to send money to one in Uganda – will be very important in supporting the next phase of growth of mobile money in Africa.
“With increased market integration in the region to create trade and economic blocks, mobile money will play an important role as it is fast, convenient and reliable. In addition, interoperability is important to promote international money remittance in the continent,” said Njue.
Monadjem agrees on its importance, saying it will be key in three respects: trust, utility and economics.
“Enabling interoperability provides more trust and confidence for users. Having to figure out if the intended recipient can receive a transfer or whether the cost will be higher than intended introduces uncertainty for users. Not knowing whether there is an agent in your intended area of travel who will process a cash out from your wallet means you are less likely to trust your mobile money wallet as a store of value,” he said.
“The broad utility aspect is rather obvious, the more users, agents and merchants one can use, the more useful the system is. Lastly, economics will become increasingly important as competition drives prices down and mobile money providers need to find ways of sharing costs.”
It isn’t all plain sailing, however. Transaction fees are still relatively high across many markets, pricing out the very lowest income individuals sending sub-$1 amounts. This is even worse for cross-network and cross-border transfers.
Njue called on service providers to lower the fees charged for transactions, and even to some extent zero-rate services, especially when used to transact small amounts of money or purchase airtime.
“By promoting service interoperability, service providers will ensure that the mobile money services are accessible across all areas,” he said.
“There is also need for increased service awareness to educate people on the importance of mobile money services. Governments can also promote the growth of the sector by relaxing mobile money service regulations.”
Mobile money is clearly big business, and getting bigger. The major question for the future is how the sector can be tweaked and fine tuned to ensure its impact is as big and as developmental as it possibly can be.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.
