Africa’s mobile money boom

There is room to grow the success of mobile money in Sub-Saharan Africa further through the improvement of interoperability and the adoption of technology in the oversight of the sector. [Courtesy]

There has been an exponential boom over the last year in the use of mobile money across the continent, owing to increased digitisation and the sophistication of the digital transactions ecosystem.

Kenya, one of the global leaders in the adoption of mobile money, hit a record-breaking high between January and November 2021 with users transacting about USD55.1 billion (Sh6.2 trillion), as per data from the Central Bank of Kenya (CBK).

That surpasses the USD45.9 billion (Sh5.2 trillion) mark achieved in the whole of 2020, as well as being the highest value recorded since the introduction of mobile money wallets in the country.

It is also important to note that this increase came despite the withdrawal of subsidies implemented by the government in 2020 to ease the burden on those transacting and encourage the adoption of cashless payments owing to the Coronavirus pandemic.

This boom is being experienced across the continent too.

Data from the World Bank recognised Ghana as the fastest growing mobile money market in Africa over the last five years.

As per a study, Five Strategies for Mobile-Payment Banking in Africa, mobile phone and wallet transactions accounted for 82 per cent of Ghana’s Gross Domestic Product (GDP) compared to 87 per cent in Kenya, despite lower smartphone penetration rates compared to China – the only geography whose overall mobile financial services market penetration is higher than Africa.

The widespread success of mobile money in Africa owes much to its exclusivity from bank accounts, meaning that it brings into the formal financial ecosystem individuals who might face barriers in opening a traditional bank account.

Other nations outside Africa have looked to develop their own mobile payment platforms, bringing to mind apps like Venmo, but many of them are linked to existing bank accounts thus limiting their reach to those within the formal financial ecosystem.

Data from the Wall Street Journal highlights that nearly half of the 1.04 billion registered mobile money accounts worldwide are in sub-Saharan Africa.

However, there is room to grow the success of mobile money in Sub-Saharan Africa further through the improvement of interoperability and the adoption of technology in the oversight of the sector.

Ghana implemented its first mobile money interoperability system in 2018. This move was advised by the need to eliminate barriers and complexities associated with transfers across the varied mobile money networks.

 Between 2018 and 2021, the number of individuals aged 15 and over who have a mobile money account has increased from 13 per cent to 38.9 per cent as per data from Statista.

Kenya too adopted mobile money interoperability in 2018 when the number of mobile money subscribers, according to data from CBK, stood at 37.8 million. That number today has risen to 67.15 million mobile money subscribers as of November 2021.

James Claude, the CEO of Global Voice Group. [Courtesy]

James Claude, the CEO of regulatory technology developer and big data analytics company Global Voice Group (GVG) believes that mobile money interoperability can be of great benefit to Africa and allow it to replicate the boom experienced in 2021.

“The mobile money ecosystem has experienced an undeniable revolution over the last years. Only a year ago, 562 million Africans were using mobile money services, which represents a 12 per cent increase compared to the previous year,” he says.

“This revolution has fostered financial inclusion across the continent, but there is still a long road ahead to reduce the region’s unbanked population. In that respect, mobile money interoperability plays a crucial role in bringing down the costs of sending and receiving money across the African continent, which in turn improves access to these digital transactions”.

In its formative years in Kenya, mobile money was used primarily for peer to peer (P2P) transactions, but they have now become a major payments channel for businesses too.

Many businesses today are able to receive payments from customers via mobile money, whilst others also disburse payments via the same channel. The growing scope of the industry calls for more agile and effective oversight of the sector.

This mandate cuts across multiple sectors with Mobile Network Operators (MNOs) and the financial services sector falling under separate dockets. The oversight of mobile money must therefore take this into consideration and ease the collection of relevant information, as well as its use and interpretation by the relevant parties.

Analysis by experts from Pricewaterhouse Coopers (PwC) Kenya calls for the adoption of technology for oversight.

The experts say that “predictive analytics will go a long way in addressing the gaps as it will allow real-time collection, analytics and soft data reporting”.

The overall impact that technology will have in bolstering oversight is immense, especially when considering the fact that the digitisation of payments has grown rapidly over the last two years.

Overall, the growth of mobile money shall continue as a result of its relevance to the situation on the continent. The increased adoption of smartphones and increased internet penetration shall also play a key role in this.

Claude seconds this view highlighting that “the rate of this growth will highly depend on the pace at which internet access reaches the unbanked and on how quickly interoperability-related issues are solved, in addition to the security concerns associated with mobile money transactions.”

“With the implementation of technologies that adjust to the needs of the payments ecosystem, as well as those of the beneficiaries, the digital economy, and more specifically mobile money, will surely continue to grow at high rates”.