Mobile Payments: Sub-Saharan Africa is the Number 1

In Sub-Saharan Africa, many people lack access to a bank account. Over the last decades, however, the rise of mobile phones has enabled these people to participate in the financial market via mobile payment services. In some countries, the number of mobile payment accounts exceeds the number of bank accounts. Although cash remains the most important method of payment, new innovations in mobile payment will help African economies to move towards digital economies.

Mobile payments account for almost 10% of Sub-Saharan Africa’s GDP.

Platforms like M-Pesa and Mowali have a huge user base and connect millions of people around the globe. The platforms are mainly used to buy airtime and send money domestically. Nevertheless, receiving wages, paying utility bills and paying for other goods and services are among the popular services offered on these platforms. Mobile payments account for almost 10% of Sub-Saharan Africa’s GDP. In Asia, often associated with high mobile usage, mobile payments account for 7% of the GDP. In other regions, mobile payment does not play an important role. Moreover, 10 out of 100 adults in Africa are active users. This compares to only 2.6 active users out of 100 adults in South Asia.

However, also within Africa, there are huge differences in mobile payment usage and three country groups can be distinguished. First, in mature markets like Kenya and Tanzania, there are more mobile payment accounts than adults as people choose to create multiple accounts to circumvent limitations on interoperability. The second group, maturing markets, includes South Africa and Cote d’Ivoire for example. In this group, there are between 100 to 1,000 accounts per 1,000 adults. Nigeria, Egypt, and Morocco are in the last group, the so-called sleeping giants. Due to regulation, mobile payment services are not widely used in Nigeria and Egypt. Morocco has a high banking penetration and hence, mobile payment services are not as demanded as in other regions.

Foreign investors have started investing in African fintechs.

Next to payment services, some fintechs provide other services like insurance and credit services. Some platforms position themselves in a niche to serve a specific customer group (e.g., providing a reliable service in regions with low internet speed). Also, foreign investors have started investing in African fintechs.

So far, rural areas have been among the benefiters as traveling long distances to pay bills is no longer neccesary. Also, if users want to withdraw money or top-up their accounts, the high number of agents compared to banks and ATMs reduces travel time. Now, many industries start to benefit from the widespread access to financial services. Agriculture, health and public administration are among these industries.

However, many commentators point out that policymakers have to make sure that they build a stable environment in which the new innovations can prosper. As mobile payment services rely on a stable (internet) connection, the infrastructure to provide electricity and internet services has to be built and maintained. Also, the regulators have to keep up with the fast pace of innovation. However, regulation should not hinder fintechs to provide new solutions and services as they can help Africa to become a digital economy. Nevertheless, issues like fraud and cyber risk have to be addressed by regulators. Yet, the African countries have not managed to keep up with the rapid growth of mobile payment service in both terms, infrastructure and regulation.

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