13 December 2024

For all the benefits delivered by mobile money across the continent, it remains unclear whether there is any notable impact on enhancing connectivity…

There’s no denying the popularity of mobile money across the continent.

The GSMA reports that registered mobile money accounts grew 12% year-on-year to 1.75 billion in 2023, with some 435 million active by year-end – a 9% annual rise.

Transaction volumes grew by 14% year-on-year, while, importantly for the operators, average revenue per user was up from $2.2 in September 2022 to $3.2 in June 2023 – resulting in higher profitability.

Indeed, mobile money has expanded access to financial services for millions of Africans who previously had restricted or no access to traditional banking. Often more accessible than traditional banking, especially in remote areas, mobile money allows users to manage all aspects of their finances without needing to visit a physical bank branch. And, by facilitating easier transactions, small businesses are empowered, delivering a much-needed economic boost.

Bridging the divide
It’s a popular notion that the widespread adoption of mobile money has helped drive a reduction in the digital divide.

“By bringing financial services to remote and underserved communities, mobile money is helping to bridge the digital divide in Africa,” asserts CG Selva Ganesh, VP, CEO South Africa at In2IT Technologies. “It allows people who have been excluded from the formal financial system to access essential services like payments, savings, and loans. This not only enhances their financial security but also encourages the growth of local economies and supports broader digital adoption.”

Wiza Jalakasi, Director of Africa Market Development at EBANX, agrees that mobile money is stepping up to bridge the divide, but “within the expectations set for it.

While it won’t solve the problem alone, it can significantly speed up progress as it has been doing. Very much driven by mobile money, digital payments penetration in sub-Saharan Africa doubled in less than eight years, from 23% to 46%. This strong adoption, combined with higher internet access, is unlocking digital commerce – which is growing faster across five of the main African countries than it is in the USA, or European countries. Addressing challenges like interoperability between platforms, providers, and countries will further boost not only Africa’s digital inclusion but also its economy.”

Claire Maslen, Programme Director for Commerce and Payments, Mobile Ecosystem Forum (MEF), however, says that the debate around bridging the digital divide is far wider than just offering mobile money or mobile financial services to users.

“To start to close the digital gap, governments, authorities, NGOs and the private sector must look at the investment needed to provide broadband and connectivity, access to handsets and devices, and education on how best to use the wealth of information that exists on the internet,” says Maslen.
Mobile money has been transformative for sure; however, challenges remain in network coverage and reliability, handset affordability, and security.

“Mobile money has certainly been a success story in many ways, providing financial services to millions of unbanked Africans and significantly contributing to economic inclusion,” states Ganesh. “However, challenges remain, such as limited access in some rural areas and digital literacy gaps, which prevent it from fully bridging the digital divide across the continent.”

Indeed, Maslen believes that mobile money is just one facet to solving the digital divide: “the main requirement for all markets is investment in network infrastructure.

Once a reliable and robust infrastructure is in place not only will users have easier access to banking and financial services, but they will also have access to education and employment opportunities – which with the right knowledge and support – will in turn create inclusion and equity for communities. Mobile money in all markets where it exists, has certainly made strides to achieving financial inclusion.”

Those who need it most
With these remaining challenges limitations in mind, the jury is out on whether mobile money is reaching those who need it most.

“For women, mobile money has provided financial independence and greater economic participation. The disabled population has also benefited from mobile money’s ability to facilitate financial transactions without needing to visit physical bank branches,” shares Barnwell. “While there is always room for improvement, the progress made so far is a testament to the positive impact mobile money has had on these underserved groups. Continued efforts to improve digital literacy, affordability, and tailored services will ensure that mobile money reaches even more people in need.”

Alas, more men than women continue to have access to mobile money.

“The mobile money gender gap is yet to be closed, reported by the GSMA to be as high as 30% in Senegal and 46% in Nigeria,” confirms Kirsten Wortmann, Regional Director, Africa, Paymentology. “The GSMA also reported that a lack of knowledge and skills related to mobile money is an important barrier to higher adoption among women. Mobile money operators can reduce this barrier by providing information and training which is tailored to the female demographic.”

“I think it’s important when designing and developing mobile money solutions, product teams explicitly address inclusion issues, rather than assume or imply these segments will be reached,” says Maslen. “To address inclusion, it helps if the teams are diverse – our organisations should be representative of the communities we serve.”

“While mobile money has expanded access to financial services for many, it hasn’t fully reached all those who need it most,” agrees Ganesh. “Overcoming obstacles like lower phone ownership among women, accessibility issues for disabled users, and cultural barriers requires targeted initiatives, including gender-sensitive designs and more inclusive financial literacy programmes.”

Movers and shakers
On a roll now, mobile money in Africa has evolved significantly in recent years, moving beyond person-to-person transfers to include a wide range of financial services such as savings accounts, microloans, insurance, and investment options.

“Telecom providers, institutions and fintechs across Africa have recognised the growing momentum of mobile money and are expanding their mobile money offerings with new products and VAS including next-generation payments technology,” says Wortmann. “For example, Zambian fintech Union54 recently added virtual cards to its ChitChat messaging and mobile money platform, enabling users to instantly issue virtual Mastercard cards, providing a convenient and fraud-resistant payment option.” The impact on MNOs has been profound.

“Mobile money has become a critical revenue stream, often surpassing traditional services like voice and SMS,” says Barnwell. “It has allowed operators to engage with customers more deeply, reduce churn, and open up new business opportunities. Overall, the evolution of mobile money has solidified the position of MNOs as key players in the financial landscape, driving both profitability and customer loyalty.”

“It has also intensified competition with fintech companies and traditional banks, pushing operators to innovate continually,” adds Ganesh.
Recent years have seen mobile money evolve not only in terms of how users access it from the early days of USSD to the current developments around super apps.

“Perhaps more interesting though is how the ecosystem is developing,” says Maslen. “The operators have led the model for many years. But what we’re starting to see are developments around interoperable systems and more parties joining the eco-system. The opportunities for banks to reach typically underserved communities, or for fintechs to work with traditional banks to deliver rapid scale often at lower cost, is yet untapped.”

But exactly how successful has mobile money been for improving MNO profits? According to Barnwell, “extraordinarily.”

“By offering essential financial services to the unbanked and underbanked populations, operators have tapped into a vast and growing market. The simplicity and accessibility of mobile money have led to widespread adoption, driving significant increases in transaction volumes and, consequently, revenues,” says Barnwell.

To maximise its potential, says Ganesh, MNOs should explore cross-border partnerships and expand into international remittances, as well as enhance the user experience through robust security measures and user-friendly interfaces to build trust and attract more customers.

Barnwell adds: “to further capitalise on this potential, MNOs should continue to innovate by expanding their service offerings — introducing more sophisticated financial products like microloans, investments, and insurance. Additionally, MNOs can leverage strategic partnerships with fintech companies and traditional banks to enhance service delivery and reach new customer segments, thus maximizing the full potential of mobile money.”

A hybrid future
With success already in hand, what does the future hold for Africa’s mobile money ecosystem?

“I expect mobile money to continue its strong growth trajectory across Africa, especially in regions like East Africa, which has already seen substantial adoption,” shares Ganesh. “Countries like Kenya, Tanzania, and Uganda will likely lead in further adoption due to their established mobile money ecosystems and supportive regulatory environments. However, regions such as Central and West Africa may continue to be underserved due to infrastructural challenges and lower mobile penetration rates.”

Looking ahead, Barnwell expects significant growth in West Africa, particularly in Nigeria and Ghana, where regulatory environments are becoming more conducive.

“East Africa, where mobile money has already deeply penetrated the market, will continue to innovate and set the pace for mobile money services. However, some regions, such as Central Africa, may still face challenges due to political instability and weaker infrastructure, which could slow adoption,” says Barnwell. “Nonetheless, I remain optimistic that ongoing investment in infrastructure and favourable regulatory changes will gradually bring mobile money to even these underserved regions.”

“Regulatory support of mobile money operators and their fintech partners will also be a crucial catalyst for adoption over the next five years,” adds Wortmann. “Regulatory guidelines differ vastly across Africa, and countries with guidelines that are not cloud-friendly, requiring on-soil hardware, hamper the adoption of next-generation payment technologies among unbanked demographics. Jurisdictions with regulations friendly to the cutting-edge of fintech will enable mobile money to continue its high pace of innovation and provide a wider range of accessible financial services to traditionally unbanked groups.”

According to Maslen, while some of the early mobile money deployments date back to 2001 in Asia, the most cited and significant deployment for scale of mobile money came from M-Pesa in Kenya in 2007.

“Now two thirds of all mobile money transactions globally, occur in sub-Saharan Africa,” says Maslen. “I think we will see the need for interoperability increase, as users travel more widely and if employment opportunities don’t exist in your home country, it is obvious people will travel and the need for cheap and fast remittance services will be in demand.”

As Africa’s banking sector increasingly engages with fintech, the landscape is likely to evolve significantly, and soon. Banks and MNOs are already forming partnerships to leverage each other’s strengths; MNOs bring extensive mobile networks and customer reach, while banks offer regulatory expertise and comprehensive financial services. Partnerships like those between M-Pesa and various banks have allowed for integrated financial services that benefit from both parties’ capabilities.

With both banks and MNOs aiming to enhance financial inclusion, collaboration can provide a more seamless and extensive range of services to underserved populations, combining the outreach of mobile networks with the financial expertise of banks. A hybrid model can thus offer the convenience of using mobile technology for transactions and the security and trust associated with traditional banks for more complex financial services.

“A hybrid or partnership model is the most likely outcome,” asserts Barnwell. “Traditional banks bring regulatory expertise, financial knowledge, and access to capital, while MNOs offer unmatched reach and customer engagement, especially in rural and underserved areas. By collaborating, these entities can create a more inclusive and robust financial ecosystem. Such partnerships would leverage the strengths of both MNOs and banks, ensuring that fintech services continue to thrive across the continent while also benefiting from the trust and infrastructure that banks provide. This model not only promises to enhance financial inclusion but also drives innovation and growth in the financial sector.”

“Partnerships between MNOs, fintechs, and banks are crucial, combining the agility and innovation of fintechs with the trust and reach of traditional banks,” agrees Ganesh. “This collaboration can accelerate financial inclusion and provide more comprehensive financial services across the continent.”

Banks are also increasingly partnering with fintech firms to integrate new technologies and innovative solutions into their services, including digital wallets, AI-driven financial management tools, and blockchain-based services.

“In other markets we have seen many successful partnerships from both fintechs and banks, and banks and operators,” says Maslen. “If created transparently with clear governance, all parties involved serve to gain. Good partnership models allow for each party to grow from the others’ area of expertise, whilst allowing their investment and focus to remain on their core business. Reaching new customer segments, delivering in new markets or even stretching into adjacent sectors is definitely something where partnership model could be attractive.”

Indeed, the future of fintech in Africa is likely to be characterised by a hybrid or partnership model between banks, fintechs and MNOs. rather than a complete shift from MNOs to traditional banks. Collaboration has the power to drive innovation, expand financial inclusion, and enhance the overall financial services ecosystem.