Africa has emerged as the global leader in mobile money – thanks in part to a history of being underbanked – but phone companies are starting to see their lead in payments challenged.
For 10 years, mobile network operators have dominated the mobile money services market in Africa, however fintech companies and banks are beginning to establish a solid stake in the market, according to McKinsey consultants.
Mobile money is the ability of consumers to send, receive, and store money using their mobile phones.
Just over 50pc of the 282 mobile-money services operating worldwide are located in sub-Saharan Africa, according to the global mobile operator representative GSMA.
After a late start, a number of banks in Africa are beginning to compete aggressively for the mobile-banking customer, according to McKinsey.
In Africa today, there are 100 million active mobile money accounts, used by one in 10 African adults.
This volume of users far exceeds customer adoption in South Asia, the second-biggest region for mobile money in terms of market share, where there are 40 million active mobile money accounts used by 2.6pc of adults. And the market in Africa is growing.
As well as the volume of users, the value of the mobile money market in Africa is substantial, with the continent’s two leading mobile providers – M-Pesa and MNT Mobile Money – earning $500m (€425m) and $200m in annual mobile financial services revenues, according to McKinsey.
As the market in Africa grows, so too does the product offering. Mobile money now extends far beyond initial offerings, which enabled consumers and small businesses – many of which had little or no access to a bank – to send and receive money quickly and securely across great distances.
Today, mobile financial services have expanded to include lending, insurance and cross-border remittances.
Providers of mobile money solutions in Africa today fall into five different types, according to the McKinsey report.
These are: mobile network operators (MNO) acting alone; MNO-led partnerships, such as tie-ins with banks to provide products beyond payments, such as small consumer loans and deposit taking; bank-led partnerships with MNOs; banks on their own using app and text-based money transfer services; and financial technology (fintech) providers.
Despite the increasing push by banks and fintechs into to the market, MNOs continue to dominate, especially in terms of customer numbers.
The most successful MNO-led mobile money launches (M-Pesa and MTN Money) have from five to 10 times as many clients as big banks like FNB South Africa and Equitel bank in Kenya.
In order to respond to the dominance from MNOs, banks in Africa have a number of options available to them, according to McKinsey.
They may be able to go it alone and build their digital financial-services offering, build a digital bank, partner with a fintech or partner with a telecommunications company in order to improve their offering.
The explosion in access to financialisation is changing Africa and changing the payments market. Having missed the initial surge, banks that want to survive long term are now scrambling to get on board.
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