Early adoption was pushed by the development of services provided by telcos and mobile network operators (MNOs) that use the unstructured supplementary service data (USSD) communications protocol. But the gradual expansion of higher speed third (3G) and fourth-generation (4G) mobile networks coupled with a greater smartphone penetration amongst the region’s populace has prompted many to now offer electronic wallets (eWallets) too.
M-Pesa, MTN, Orange Money and Airtel Money lead the way
M-Pesa is Africa’s and arguably the world’s leading mobile money service in terms of longevity and user numbers, having launched in Kenya as far back as 2007. The company estimated that 42m active customers carried out over 11bn transactions in the fiscal year 2019, driven in part by the long reach of its owner – Vodafone’s Safaricom – which serves large numbers of mobile phone customers in multiple African countries.
Thanks to M-Pesa, financial inclusion in Kenya was calculated at 83% in 2019, the highest of any country on the African continent, with the World Bank estimating that 73% of over 15s have mobile money accounts (and only 56% bank accounts). The service has evolved from being a USSD the only platform at its initiation to now include a smartphone app which has been rolled out to most (though not all) of Safaricom’s seven operating territories.
Another success comes from regional mobile network operator MTN. The telco’s five-year financial review published in 2019 revealed it has around 250m phone subscribers using its networks across 21 operating territories, including approximately 150m in seven sub-Saharan African countries.
MTN’s Mobile Money (sometimes called MoMo) service allows customers to send money to local mobile phone numbers, buy pre-paid services like electricity and phone top-ups, make retail purchases at selected POS terminals, and deposit or withdraw cash at MTN stores or mobile money agents. Users aren’t required to have a bank account – instead, transactions are charged to their mobile phone bills. The MTN Mobile Money service boasted around 30m active customers in 14 African countries conducting over 9.4k transactions per minute before its launch in its native South Africa in early 2020.
French telco Orange also offers Orange Money, which according to its 2019 Annual Report had 45m customers and 18m active monthly users last year (up 20% over FY18). The business expanded by around 27% year on year to account for 8% (roughly €452m) of total revenue yielded by Orange’s entire MEA operations (€5.6bn) and is available in the sub-Saharan African territories of Cote D’Ivoire, Senegal, Botswana, Cameroon, Guinea, DRC, the Central African Republic, Liberia, Burkina Faso, Sierra Leone and Guinea Bissau.
The Orange Money eWallet app allows airtime top-ups, utility bill payments. The launch of Orange Bank Africa in July this year in Abidjan and Côte d’Ivoire is the fruit of a partnership with Nigerian banking and insurance firm Nouvelle Société Interafricaine d’Assurance (NSIA) Group that will also allow customers access to a broader range of financial services – savings and micro credit services for example – via the Orange Money app on their smartphones.
Mobile payments were also reported to have been a critical driver of revenue growth for MNO Airtel Africa in the 12 months ending March 2020. The company’s financial statement records mobile money turnover at US$220m, up 29% year on year with the majority (US$157m) coming from the East African business which includes Kenya, Uganda, Rwanda, Tanzania, Malawi and Zambia. First-quarter results suggest that revenue has grown again in the three months ending June 2020, with turnover from mobile money up 20% year on year to US$81m.
Airtel Africa’s Mobile Money currently allows users to top up their mobile accounts, pay utility bills and shop online, with the telco more recently extending its services to facilitate international payments. They signed a partnership with Ecobank Transnational in Dec’19 which (subject to regulatory approval in each territory) will allow customers of both companies across Africa to make online deposits and withdrawals, as well as international transfers and payroll payments directly into Airtel Money, accounts for example.
A further collaboration with remittance firm Mukuru forged in July 2020 will eventually allow the latter’s customers to send cross-border transfers directly to Airtel Money customer wallets in 12 African countries, starting with Malawi, Zambia, Uganda, Tanzania, Kenya and the DRC. A similar deal with WorldRemit will extend the same facility to Africans living in 50 other countries across the globe. Those partnerships should give Airtel Africa a much larger pool of potential customers for its mobile money services – EcoBank’s Rapidtransfer already enables instant cross-border payments in 33 countries within the sub-Saharan region, having amassed 44k agents in its four-year existence.
Specialist providers begin to emerge
Telco-led services are just the tip of the iceberg, however. In its State of the Industry on Mobile Money 2018 report published last year, GSMA intelligence counted 132 different mobile money service deployments in sub-Saharan Africa to date, the largest number of any region in the world and ahead of South Asia in second place at 43. The GSMA estimated a 14% increase in active mobile money accounts to 128m between 2017 and 2018, with transaction volume up 12% to 1.7bn yielding a total value of almost US$27bn (up 15% year on year).
Launched in 2011 Nigeria’s Paga Wallet is another mobile phone-based payments platform that allows consumers without bank accounts to pay for online and offline goods and services, albeit through a network of physical kiosks and “human ATMs” where users make cash deposits. The mobile app can also be funded by internet banking from a registered account, with support for money transfers, bill payments and mobile phone top-ups. Earlier this year saw Paga collaborate with the Flutterwave payment gateway to allow its customers to make online payments in multiple African countries directly from their eWallets.
Banks in sub-Saharan Africa appear to have been slower to recognise the opportunity around mobile payments, with some continuing to harbour concerns around about the erosion of revenue through lost transaction fees and regulation. A handful of the banks are now making their move to suitable digital platforms, however. South African bank Nedbank debuted its USSD-based MobiMoney money transfer smartphone app in 2018, allowing users to make deposits and withdrawals, conduct purchases and send remittances at Nedbank ATMs and participating retail stores. It later launched a new tap-on-phone function that will enable merchants and business owners to convert their NFC-enabled smartphones into payment terminals in June 2020.
Elsewhere DumaPay (formerly mSWIPE+) is an example of a combined USSD and mobile wallet services designed for consumers and businesses that accommodate various types of payment methods – including mobile money, mobile banking, QR codes, eWallet and EMV-enabled debit/credit cards. In Nigeria, where 42% of 16 to 64-year-olds use banking apps and 46% shopping apps according to GlobalWebIndex, Quickteller and GetBarter apps allow users to make purchases or payments online or at POS terminals using NFC enabled smartphones.
Greater support for DCB will increase eCommerce sales
The continued absence of global eWallet providers such as Google Pay and Samsung Pay in most sub-Saharan African countries has also given telco-led services and local specialists a clear run at market expansion. That could be about to change, however, at least when it comes to mobile payments for digital goods purchased from app stores in certain countries where regulations allow.
Vodacom Tanzania forged a direct carrier billing (DCB) partnership with Google Play in 2018 that allows customers buying apps and digital content to pay for them quickly and securely through their telephone bills or pre-paid balances for example, whilst DOCOMO Digital partnered Airtel Tanzania to do the same thing in July 2020. Safaricom has been offering customers in Kenya the ability to fund purchases via DCB since 2015.
DCB represents an incredibly convenient payment method in a highly fragmented region with 48 countries, which for the most part have restricted banking infrastructure and account ownership, low card penetration and a high dependence on cash transactions alongside flourishing cross border trade activity. A report from Analysys Mason – Connected Consumer Survey 2019: digital services in Sub-Saharan Africa – estimates that 51% to 55% of consumers in South Africa, Nigeria and Kenya shopped online at least once a month last year, up 2% on 2018. Mobile phones are used to conduct the majority of those transactions in all three territories, with the analyst firm recommending that a combination of more intuitive interfaces on payment platforms and more generous support for DCB on eCommerce sites will help to increase sales for both mobile network operators and merchants in the future.