The latest research from the GSM Alliance (GSMA) charts the continued growth of the mobile money ecosystem in Africa, described as the “enduring epicentre” of the industry. And mobile money services are also generating sizeable chunks of revenue for the mobile network operators (MNOs) delivering them – 57% contribute more than 15% of total operator turnover found the GSMA.
Registered account numbers grow 12%
Its State of the Mobile Money Industry in Africa report calculates that the number of registered mobile money accounts in the region grew 12% year on year to 481 million in 2019, a number which constitutes 46% of the global total. The numbers would have only risen dramatically with the pandemic acting as an accelerant for digital payments the world over. The number of active accounts (183m) represents almost 25% of the region’s adult population, with 40 services having over 1m accounts which have been active for 90 days or more, and six having over 5 million active 90 days accounts.
While the general direction of travel is upwards, there are variations in the pace of expansion and provision across different regions of the continent, however. As of December 2019, 52% of registered accounts in the region (249million) hail from Eastern Africa with over 54 live services, 102m active accounts and 5.2million mobile money-enabled insurance policies issued in 2019.
Another 34% derived from Western Africa where there are now 163million registered accounts (up 14% YoY) and 56m active accounts (up 22%). Those growth rates led by Nigeria, Ghana and Senegal and that fact that the region has the largest number of live services in Africa at 59.
Central Africa saw similar rates of expansion, especially in Cameroon and the Congo. At the same time, Northern Africa and Southern Africa continue to expand from a much smaller base as new entrants came into the market. In Botswana, for example, local telco Botswana Telecommunications Corporation (BTC) launched its SMEGA service using Comviva’s white-labelled mobile money platform Mobiquity Money. In Morocco too MNO Inwi launched its own USSD and app-based mobile money service in September 2019 while two more services from Maroc Telecom and Orange received approval from the Bank Al-Maghrib in the summer of 2018 but didn’t launch until a year later.
Transaction volume and value trends indicate mobile money services funded a much larger number of higher value purchases in 2019 compared to the previous year. Over US$293 billion exchanged in 17 billion transactions in Eastern Africa during 2019, numbers which expanded 24% and 15% respectively over 2018. Western Africa again demonstrated more impressive momentum, with a year on year growth rates of 35% and 28% respectively.
Digital transactions account for the majority of value
Roughly a third of transactions entering the African mobile money ecosystem are digital, but 69% of services are still heavily reliant on cash. Even so, the value of digital commerce has grown to account for the majority (53%) for the first time in 2019 up from 48% in 2018, expanding at a compound annual growth rate (CAGR) of 37% since 2014.
The extent to which mobile money has become embedded in the African economy is apparent in the type of transactions. A third of monthly accounts now receive their salaries via mobile, estimates the GSMA, while almost three-quarters of mobile money providers (73%) have partnered with agribusinesses and co-operatives to facilitate payments to smallholding farmers.
Utility payments constitute 61% of total bills processed via mobile payments, while African mobile money providers integrate with an average of 35 government agencies. Bulk disbursements that involve cash payments for goods and services rendered but also social cash transfers in the form of government grants make up 40% of all transactions in sub-Saharan Africa specifically. On average, there are eleven humanitarian organisations partnered with a mobile money service in each African country according to the UN High Commissions for refugees, with digital cash assistance delivered to over 1.7m unique mobile money accounts in 2019.
And while almost half (47%) of all mobile money transactions in Africa are airtime top-ups of mobile phone credit, these count for only a fraction (2.4%) of the value. In contrast person to person (P2P) transfers represent just under a third of transactions but constitute over two thirds (69%) of the total value – another strong indication that Africans are trusting mobile payments with ever-larger sums of money.
The growing popularity of more sophisticated financial products suggests mobile money is extending beyond transfers and payments, however. During 2019, 10.8m mobile-enabled insurance policies were issued (5.2m in East Africa alone) for example with an estimated US$3.5bn worth of digital loans disbursed across the content. There are suggestions that mobile money is also helping and encouraging Africans without traditional bank accounts to set money aside. The GSMA calculates that average unique customer saved US$264 in 2019, with 8.9m people transferring more than US$196m to mobile money enabled savings accounts during the year.
Opportunities and challenges ahead
While progress is undisputed, the GSMA highlighted areas of the mobile money ecosystem that present significant opportunities for further growth. Mobile money-enabled international remittances, for example, constituted only 0.4% of transactions in 2019 (and 2.4% of value). There is potential for mobile money providers to establish a firmer foothold in a financial market estimated to process around US$3.2bn of transactions a month in West Africa alone once a pandemic-related lull in activity has eased in 2020 and 2021. There is also scope for mobile money providers to expand on their existing partnerships with non-government (NGOs) and humanitarian organisations to aid the distribution of funds to the estimated 25 African citizens forcibly displaced from their homes in 2019.
New regulation introduced to combat money laundering and to encourage fairer, more transparent transaction fees are good news for consumers. However, there is a danger that they could interrupt growth at a country level if they are implemented without addressing the friction and constraints in the formal banking system.
Botswana’s government introduced new rules that mandate the country’s telcos (including Mascom, Orange and BTC Mobile) must separate mobile financial payment services from other parts of their portfolio. If African MNOs are to help promote greater financial inclusion through the provision of mobile money services, they need an open and level playing field which allows both banks and non-banks to have the same market access. That means establishing universal open banking rules across the entire continent and harmonising national regulation to encourage product and service innovation for the MNOs that cover multiple markets in the continent.