Africa’s

Finweek English Edition - - INSIGHT - MO­BILE FI­NAN­CIAL SER­VICES

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.

Kenyan Shillings

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