Building Africa’s Mobile Economy

In recent years, the advent of mobile money services across the continent has enjoyed explosive growth. We explore the trends and major players behind Africa’s booming digital infrastructure  
 
Writer: Phoebe Harper
 
 
Despite hosting multiple countries with some of the highest ‘unbanked’ populations across the world, translating to approximately 60 percent of the total continental population, Africa maintains a reputation as a global leader in the realm of mobile money services. 
 
According to a report in the Wall Street Journal, only 45 percent of the African population possess an active cell phone, yet over the past few decades, the continent has been carried on a mobile money boom, pioneered by the fintech revolution and the advent of the mobile economy. 
 
WHAT IS MOBILE MONEY?
Mobile money specifically concerns digital payment transactions that are facilitated either on or offline without the use of a personal bank account, with the payment instead enabled by a telecoms provider. 
 
For many, the true beginning of Africa’s mobile money movement began in 2007, when Kenyan company Safaricom launched what is now one of the most celebrated mobile-to-mobile payment services in the world, processing some 16 million transactions a day – M-Pesa.
 
In terms of profitability and growth, Africa is the second largest banking market in the world. This is complimented by the thriving technology start-up scenes witnessed in African countries such as Nigeria, South Africa, Egypt and Kenya, that has triggered widespread digital disruption within the finance sector. 
 
Many imitators have since followed in M-Pesa’s wake, both across Africa and further afield, including the launch of French telecom giant Orange’s mobile money service, which clocked 19.6 million active customers across Africa as of June 2021. As such, Africa’s finance sector continues to give rise to innovative products centred on an omnichannel banking approach, delivering financial services through various digital channels such as USSD (SMS banking), internet and mobile banking. 
 
Increasingly, mobile technology is bridging the gap between the lack of a traditional banking infrastructure and widespread financial inclusion. Fintech innovators occupy the vanguard of this space, from digital remittance service providers to cross-border payment platforms. 
These attractive emerging markets continue to receive attention from public and private investors alike, with fintech innovators enjoying a ‘clean slate’ business environment compared to other developed countries with established banking facilities, serving to create favourable market conditions.
 
The space where it all began, Kenya, continues to lead the charge, as the first African country to meet the UN’s ambition for 50 percent of Africans to use mobile money by 2022. As of today, 73 percent of Kenyans are already making use of such services. 
 
ACCELERATING THE MOVEMENT
The COVID-19 pandemic has been arguably the most significant factor to supercharge the growth of no-contact payments, universally accelerating mobile money services and triggering innovative mergers between fintechs, telecoms providers and banks in a movement that has been labelled by financial analysts as ‘co-opetition’ (cooperative competition). 
 
Perhaps unsurprisingly, 2020 represented the zenith of mobile money services across Africa, with GSMA, the industry organisation representing the interests of mobile network operators (MNOs) worldwide, reporting that the continent accounted for half of all global live mobile money services throughout the year. Indeed, of the 310 live mobile money services, 157 operate from Africa. 
 
Throughout the course of the pandemic, daily transactions were at an all-time high as consumer habits shifted towards the mobile economy due to social distancing measures complicating access to essential goods and providing greater impetus for cashless payments.
 
Aside from the pandemic, the governments of various African countries have been instrumental in hastening the development of mobile money, waiving transaction fees and easing ‘sign up’ restrictions for digital banking in order to keep the economy stimulated, as evidenced by both Kenya and Zambia.  
 
As time passes, the lines between traditional banks and telecoms providers continues to be blurred with the two morphing and intertwining functions in line with demand. 
 
With Africa boasting 21 of the 30 fastest growing cities in the world, alongside a favourably young demographic, 80 percent of which are armed with a mobile device, it is unsurprising that this prime market makes for such a fertile playground.  
 
As GSMA forecasts the value of global mobile money transactions to reach $1 trillion by 2023, the bulk of these transactions will come from Africa. Continual innovation is guaranteed, with many anticipating that paying bills, processing payments and potentially even banking from one’s social media page may come to represent the new normal. 
 
As such, Africa’s mobile money markets are only expected to continue this promising trajectory of exponential growth.