Mobile Money: bringing banking innovation to Africa 📱

In 2020, with over 5.2 billion mobile users in the world and with multiple upheavals having affected our daily lives—and which continue to do so—mobile money and payment by phone capabilities have become some of the most innovative and compelling responses to the many social, technological, health and societal challenges of our time.

The cell phone is now unquestionably an essential channel for communicating, staying informed, distributing information, working, having fun, paying and sending bills, and more. In short, this new technical wonder centralizes most aspects of our everyday life. Using a cell phone to pay, withdraw, and send money is very much a part of our daily routine, and its use is rapidly expanding, especially in most African countries. With a mobile penetration rate of 82%, the African continent has definitely become the forerunner for mobile money, as it has adopted innovative phone payment practices with very successful results. This phenomenon of being a pioneer in digitizing financial services is likely to become one of the main components of the African financial services landscape, particularly in sub-Saharan Africa, a very dynamic region for financial services. 

With only about 20% of the African population having a bank account, but over 82% of the population having a cell phone, well-established wireless phone carriers saw an opportunity for huge growth potential and did not take long to solve the telephone payment equation. M-Pesa, Orange Money, and MTN, all subsidiaries of wireless phone carriers, have become some of the most important financial players on the African continent and have given a new lease on life to the continent’s financial inclusion objectives. Therefore, this promising sector has quickly attracted the attention of the continent’s more traditional financial and banking institutions, which have also taken the plunge on this great adventure. Standard Bank in South Africa has opted for a network of agents composed of different categories of businesses (small businesses, bank branches, bill payment locations, etc.) that offer mobile money services. In 2015, TMB in the DRC launched Pepele Mobile, an innovative mobile payment service designed to facilitate all financial services (transfers, deposits and withdrawals, merchant payments, bill payments, and account management). More recently, in May 2021, BMCI launched its digital mobile bank, Masrvi, in Mauritania, in order to meet its population’s need for available, local banking services; Interbank, which launched its digital bank IBB M+ at the same time, lauds these same objectives in Burundi. The proliferation of flourishing players demonstrates the energy and growing demand in this sector, which is all the more confirmed by the implementation of our core banking platform in more than half of all African countries. Thus, the web giants, such as Facebook’s WhatsApp, are eager to get a piece of the pie, for example, by launching WhatsApp Banking and trying to differentiate itself by leveraging its competitive advantage of the familiar SMS channel. WhatsApp banking promises a new kind of experience with its bank by pitching voice and video messaging in areas of the world where literacy rates remain a major problem. 

The telephone payment revolution, driven by goals of financial inclusion and economic growth, is playing a major role in opening up African countries for financial services, but even more so, it is empowering the population. Indeed, the most marginalized of the population—those who do not have bank accounts—more easily opt for completely digital financial services through a mobile money account. In addition to being a solution that combines simplicity, accessibility, and low costs, mobile money is easily adaptable to the traditional mode of banking by telephone, which has been in use since the beginning of the 21st century. Mobile money also promotes connectivity, security, speed, and efficiency, which adapts well to the structural and economic upheavals that populations must cope with nowadays. This new way of banking helps to overcome the difficulties that surround us. 

Mobile technology is at the heart of Africa’s digital journey, and new mobile platforms are increasingly causing significant disruptions in traditional value chains across different sectors. They promote the development of new ecosystems of fast-growing technology companies designed to overcome the inefficiencies of traditional business models, extend the reach of services, and provide greater customer choice. This industry has the advantage of being close-knit, rapidly evolving, continuously improving, and contributing to more robust and financially connected economies and communities. The financial response to the COVID-19 crisis can be seen as the beginning of the formation of these very promising ecosystems. Indeed, the large amount of humanitarian funds allocated to countries in difficulty has caused the level of G2P payments to quadruple over a very short period. The mobile payment industry has been pivotal in managing this large flow of money, working hand in hand with governments and NGOs to deliver these social and humanitarian funds to populations in need.

Nevertheless, a certain technological barrier exists in several African countries, which represents the most pressing challenge. The radio spectrum is arguably the most important catalyst of mobile money, but it’s a limited resource. To make the most of mobile money, investment is needed to develop network infrastructure to enable sufficient frequency resources and create sustainable ecosystems.

Africa, the payment by phone “laboratory,” has set the tone for the rest of the world. With more than 2 billion dollars a day being exchanged worldwide in mobile money, this phenomenon has become part of our everyday life and is a catalyst for change in our consumption habits. In 2020, we saw an increase of 43% in mobile merchant transactions, which is a testament to the rapid development of new ecosystems focused on our cell phones. Interoperability between mobile money players and more traditional banks also supports this rapid growth due to the development of complementary relationships encouraged and enabled by Open Banking. This sector has been the subject of a lot of attention that encourages openness and scalability. Thus, during 2020, with all the challenges it brought, flexibility was granted at the KYC level to industry players, and requirements for opening accounts over the phone were relaxed. Nevertheless, the sensitivity of money flows that move throughout the sector leads to necessary but disparate regulations at the international level, which can represent an obstacle to this booming industry. However, global trends are discernible—such as the general increase in telephone payment limits—and can only be welcomed by players in the field who are working on tomorrow’s habits. 

In summary: 

Since the end of the 2000s, the African continent has experienced a real revolution in its financial landscape. The introduction of cell phone payment systems has meant that hundreds of millions of Africans previously cut off from financial services are now able to make low-cost, instant electronic payments. The continent is truly a dynamic place in this sector, with more than a 43% increase in new telephone payment subscriptions and more than 550 million registered accounts with approximately 150 million active accounts on a monthly basis. It sets the pace for the rest of the world to offer new opportunities in the field of financial services, promoted by Open Banking, which puts front and center the construction of connected ecosystems that allow access to various services in an instantaneous, secure, and personalized way.

It is truly a structural revolution!