Africa blazes mo­bile bank­ing trail

Lesotho Times - - Business -

ABID­JAN — Ser­vices al­low­ing con­sumers to per­form bank­ing and pay­ment op­er­a­tions on their mo­bile phones are surg­ing in sub-sa­ha­ran Africa, blaz­ing a trail for the rest of the slower-mov­ing world to fol­low.

Given that rel­a­tively few Africans have tra­di­tional bank ac­counts while most now own a mo­bile phone, it is of lit­tle won­der the re­gion has taken the global lead in us­ing the de­vices to pay bills, make pur­chases, man­age their sav­ings or get fast ac­cess to cash.

A re­port last year by Swedish tele­com com­pany Eric­s­son said mo­bile sub­scrip­tions in sub-sa­ha­ran Africa were set to sur­pass 635 mil­lion by the end of 2014 -- a fig­ure “pre­dicted to rise to around 930 mil­lion by the end of 2019.”

Data from the World Bank for 2014 also showed that while less than 29 per­cent of peo­ple aged 15 and over in the re­gion had a tra­di­tional bank ac­count, around 10 per­cent pos­sessed an al­ter­na­tive ac­ces­si­ble by mo­bile phone. That fig­ure rose to over 50 per­cent in coun­tries like Gabon, Kenya and Su­dan.

Over­all, the World Bank found 16 per­cent of sub-sa­ha­ran mo­bile users have used their phones for bank­ing pur­poses –– a fig­ure larger than any other global re­gion, and ripe for far wider use still.

In 2014 alone, about $67 bil­lion in funds were trans­ferred by African ex­pa­tri­ates back to peo­ple on the con­ti­nent. With fees charged by mo­bile bank­ing com­pa­nies for trans­ac­tions gen­er­ally lower than tra­di­tional in­ter­me­di­aries like West­ern Union, the growth po­ten­tial for fi­nan­cial phone ap­pli­ca­tions ap­pears enor­mous.

For now, how­ever, tele­com op­er­a­tors in Africa largely limit mo­bile ser­vices to buy­ing phone cred­its, pay­ing wa­ter and elec­tric­ity bills, or mak­ing money trans­fers and cash with­drawals –– rel­a­tively ba­sic but con­sid­er­ably handy ser­vices to lo­cal clients.

‘Real so­cial ser­vice’ “Pay­ing an elec­tric­ity bill in Africa takes a half a day be­cause there are very few of­fices where that is pos­si­ble. So there’s a real so­cial ser­vice in be­ing able to set­tle bills from a dis­tance,” said Al­ban Luh­erne, direc­tor of Or­ange Money, the mo­bile bank­ing unit of French op­er­a­tor Or­ange.

The Bos­ton Con­sult­ing Group es­ti­mates that fur­ther devel­op­ment of mo­bile pay­ment ap­pli­ca­tions could gen­er­ate as much as $1.5 bil­lion in sales by 2019, when it says the num­ber of Africans pos­sess­ing a mo­bile phone should in­crease by an­other 25 per­cent.

“This seg­ment is very new, with the nu- mer­ous com­pa­nies ac­tive in it mainly be­ing start-ups po­si­tion­ing them­selves,” said BCG con­sul­tant Oth­man Omary, adding that “there still isn’t an ac­tor of ref­er­ence.”

The ex­cep­tion to that rule, Mr Omary noted, is Kenya’s M-pesa ser­vice by Bri­tish tele­com gi­ant Voda­fone’s sub­sidiary Sa­fari­com, which has be­come a lead­ing force in the sec­tor.

But even there, he said, M-pesa’s suc­cess has been built mostly on a favourable reg­u­la­tory and tech­no­log­i­cal en­vi­ron­ment ab­sent in other mar­kets.

“There have been many dif­fi­cul­ties, even fail­ures in the sec­tor, M-pesa notwith­stand- ing,” said Ge­orges Ferre, a con­sul­tant with the Roland Berger con­sul­tancy.

“For things to work, you need a coun­try with sup­port­ive reg­u­la­tion and re­ver­sals in cul­tural at­ti­tudes that of­ten view money as mean­ing cash,” he said.

Mr Omary said that as mo­bile bank­ing mod­els are de­vel­oped in Africa, they’ll need to take into ac­count the very low in­come flows of their main client base.

That means prices charged for ser­vices must be limited to af­ford­able lev­els to en­cour­age wide­spread use.

“If pro­cess­ing costs are sim­i­lar to those of a tra­di­tional bank, mak­ing a profit is go­ing to be dif­fi­cult,” Mr Omary added.

Be­cause of that, said Or­ange Money’s Luh­erne, re­turn on in­vest­ment must re­main a rel­a­tively long-term con­cern, as con­sumers grad­u­ally em­brace man­age­ment and spend­ing of their money in dig­i­tal for­mat.

“We ini­tially launched this ser­vice to en­hance cus­tomer loy­alty, and that has proven ex­tremely ef­fec­tive in do­ing so,” he said.

But “over the years, we re­alised it was a source of rev­enue in its own right, and a new growth ac­tiv­ity for the group,” he added, not­ing Or­ange Money now gen­er­ates five per­cent of com­pany in­come.

Or­ange Money is go­ing even fur­ther, pre­par­ing credit of­fers via mo­bile phones in part­ner­ship with the pan-african Ecobank. It is also con­sid­er­ing pro­vid­ing sav­ings and in­sur­ance plans by mo­bile.

Mr Omary said that large-scale migration to new mo­bile bank­ing ca­pac­i­ties may oc­cur faster than some ex­pect, with many peo­ple in Africa al­ready used to al­ter­na­tive bor­row­ing op­tions like loans from rel­a­tives to ob­tain needed cash.

“Mo­bile phones could be an in­ter­est­ing al­ter­na­tive to that in terms of cost and se­cu­rity,” he said. — AFP

Voda­fone’s sub­sidiary sa­fari­com lets its cus­tomers send and re­ceive money us­ing M-pesa.

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