By James Bayhack
Why is it that Africa is experiencing such immense and impressive growth in mobile money schemes compared to the rest of the world? To understand this, one needs to be cognisant of both the social and financial landscapes of the continent.
A growing unbanked population
It is estimated that Africa’s population will have exceeded the two-billion mark within the next three decades, while population curves across the rest of the globe are expected to either flatten or begin to decline over the same period. This growth rate, coupled with the fact that virtually all unbanked adults live in developing economies, contributes to the perfect melting pot for a mobile money market on our continent.
Mobile killed the middle man
The majority of local financial institutions have limited visibility into the largely cash-based business transactions of their potential customers, so they do not see the value in these businesses, and consequently, their products are neither relevant nor affordable. Mobile money solutions, however, enable users to cut out traditional financial institutions by conducting financial transactions on mobile devices without the need for a bank account. In this way, mobile money is vastly different to mobile banking. In addition, Africa is the second largest mobile phone market globally, with a current estimated mobile phone penetration rate of over 75% in Sub-Saharan Africa alone. With this in mind, it is no surprise that fintech solutions have transformed everyday life and disrupted traditional banking systems across Africa. As a result, the region has seen a 39% annual increase in mobile money deployments over the past decade, with both transaction volume and value seeing double-digit growth.
An inclusive landscape
Mobile money providers are also quite literally changing the landscape of social and financial inclusion. Average African citizens are able to send funds to families, provide for emergencies, and pay for schooling and monthly bills. Small business owners use the technology to accept payments and even access micro loans. It is in finding ways like these that include the unbanked in the formal economy, and increase competition for providing financial services to the majority, that the continent’s economic growth will ultimately be unlocked.
The main players
M-Pesa, which was the first mobile money payment service in Africa, was recently acquired by South Africa’s Vodacom and its Kenyan subsidiary, Safaricom. But beyond M-Pesa (which has 26 million registered users in Kenya, of which approximately 73% are active), there are several other service providers who have been highly successful in this category in Africa, including MTN Mobile Money, with 41 million registered customers (approximately 38% of which are active) across 15 countries; Orange Money, with 16 million registered customers across 14 countries; and Tigo Money, with eight million registered customers across five African countries.
The future of mobile money
There is little doubt that mobile money just makes sense – especially in Africa. This was proven in Kenya during the COVID-19 pandemic when mobile money usage soared, thanks mostly to the Kenyan government who waived sending charges of up to Kshs 1,000 (about $9.3) in a bid to encourage cashless payments and curb the spread of the disease. As no one knows what the future holds, it is comforting to recognise that mobile money services can only improve lives in the most vulnerable homes, while giving users more control over their finances.
Creating customers for life
In such a hotly contested market, organisations need to find innovative ways to set themselves apart, particularly when the offerings are so similar from one supplier to the next. Customer retention is critical, which is why businesses are choosing to set up rewards programmes to capture the market and create customers for life. It is crucial to develop a careful strategy based on your customer’s needs and buying habits, as this will ensure that your ecommerce rewards programme is always relevant to your audience. Fortunately, there are customer experience specialists to help you navigate your way using clever tech for mobile commerce.
(James Bayhack is the sub-Saharan Africa Director at CM.com).