are moving into the radar of mobile operators, financial institutions, technology firms and governments, particularly in regions where financial inclusion is limited – like Sub-Saharan Africa (SSA).
McKinsey reports that close to 500m people are unbanked (in SubSaharan Africa) while there are 502m active SIM connections representing around 253m mobile subscribers in the region. This gap between unbanked individuals with access to a mobile phone is the foundation of opportunity for mobile money. BREAKING NEW GROUND Out of the African nations, Kenya and Nigeria are leading the way in terms of adoption of mobile payment technology.
“This is a growing trend that is helping the two countries introduce more unbanked citizens to formal financial services,” says Sachin Shah, head of cash management products at Standard Bank.
Standard Bank saw the number of payments to mobile wallets in Kenya, on behalf of its clients, increase by 300% in 2013.
Millicom, a global telecom group, said that mobile money was the largest contributor to revenue growth in Africa in Q4 2012, and that the MTN Group, offering mobile money in 11 SSA markets, has more than 10m subscribers.
Given the growth in users, as well as the commitment from operators, it has become clear that Safaricom’s M-Pesa – currently the most developed mobile payment system in the world which allows Kenyans with a national ID card or passport to deposit, withdraw, and transfer money with a mobile device – is no longer the only success story in this industry. WHY MOBILE MONEY? According to Shah, multinational corporations operating in Africa are looking at ways to eliminate the risk of carrying and transporting cash. The use of mobile wallets to facilitate cashless payments is a cost-effective and efficient way of doing this.
Multinational corporations in the fast-moving consumer goods sector are particularly interested in rolling out mobile payment solutions as it allows them to distribute their products in remote areas without having to take the risk of transporting cash.
According to Wayne Cook, product head for cash management at CFC Stanbic Bank in Kenya, mobile payment is becoming a valid substitute for carrying cash in many parts of Africa.
“It’s an easy and safe way to ensure that funds reach their intended recipients, which makes it an ideal solution for companies that have large workforces requiring weekly or monthly wage and salary payments.” THE OPPORTUNITY As well as enabling payments, mobile technology is capable of extending the reach of financial services through products like insurance, credit and savings. Through effective relationships with banks and other financial institutions, mobile operators can meet a broader roader range of customers’ financial needs.
In the savings and credit space, Safaricom is leading the way through the launch of its banking and loan product, M-Shwari. M-Shwari is a banking product for M- Pesa customers that enables them to save and borrow money through their phone while earning interest on money saved.
M-Shwari was launched in November 2012, in partnership with Commercial Bank of Africa, and now has more than 2m active customers with deposits amounting to 20bn Kenyan Shillings and outstanding loans of 60m Kenyan shillings.
When digital payments take hold, as it did in Kenya, consumers eventually profit from the related savings. The cost of making payments via M-Pesa is about half that of other formal domestic-payment services. Moreover, customers can instantly send payments from their mobile phones instead of travelling an hour or more to distant bank branches.
Clearly, there is significant opportunity for digital payments in many markets of Sub- Saharan Africa. Widespread consumer acceptance of mobile-communications technology is also highly encouraging.
For players who are able and willing to move in the near future, there are also opportunities to win firstmover advantages.