Earnings from mobile money in sub-Saharan Africa to hit $1.5 billion

INCREASED tempo around the adoption of mobile money in sub-Saharan Africa has been projected to have huge growth potential and earnings for banks, Mobile  

Money Operators (MNO) and other players if strategically pursued.

    Indeed, by 2019 the use of mobile financial services in sub-Saharan Africa to do such things as pay utility bills and send money to relatives could produce an estimated $1.5 billion in fees for mobile-money providers by 2019.

    According to a research by The Boston Consulting Group (BCG), sub-Saharan Africa is adopting mobile financial services at a pace seen in few other places, presenting banks and MNOs with a set of strategic choices that will go a long way toward determining their success in the region.

    Countries in the sub-Saharan Africa include Nigeria, Angola, Seychelles, South Africa, Ethiopia, Gabon, Benin, Niger, Mauritania, Ghana, Kenya, Tanzania, and Burundi among others.

    The report said that sub-Saharan Africans are looking for more-secure ways to borrow and save money and are open to other financial products delivered using mobile phones, including loans and insurance.

   Although mobile financial services are emerging all over the world, sub-Saharan Africa’s unique circumstances — a combination of a mostly “unbanked” population and heavy mobile-phone penetration — have turned the region into an early adopter of mobile banking and a test bed for the technology’s potential. 

   Today, eight of the 10 countries that make the most use of mobile financial services are in Africa, and sub-Saharan Africa has the highest proportion of active accounts (43 percent).

   With the population in sub-Saharan Africa growing and becoming wealthier, the number of people aged 15 or older with an individual yearly income of $500 or more will rise to more than 460 million by 2019. 

   The report informed that this trend was likely to strengthen as governments in sub-Saharan Africa increasingly focus on their education, health, and security systems — enhancing the potential for long-term economic growth in their countries. 

   According to BCG, by 2019 there will also be some 400 million unique mobile-phone subscribers and almost 150 million traditionally banked sub-Saharan Africans. That will leave some 250 million sub-Saharan Africans aged 15 or older who have incomes of $500 or more and mobile phones but no traditional bank account. This gives a sense of the potential market for mobile financial services.

   A BCG partner and co-author of the report, Hans Kuipers said mobile financial services aren’t new, but they are at an inflection point and adoption is accelerating.

   “This is not something that African banks or MNOs can afford to ignore. A bank or MNO that isn’t active in the market runs the risk of becoming less and less relevant.”

    To another co-author, Michael Seeberg, mobile financial services are “a way for African banks to drive and capitalize on the trend toward financial inclusion. “Failing to come up with a strategy could erode a bank’s existing customer base as even traditionally banked Africans increasingly turn to the simpler and cheaper mobile offerings.”

   The report said for banks and MNOs, a welcome dynamic of the market is its nascent state and the immature vendor landscape. With the exception of m-pesa — a service whose breakaway success in Kenya, the report notes, stems largely from favorable regulatory circumstances — no mobile financial service in sub-Saharan Africa has established an impregnable position yet.

    To succeed, BCG said banks and MNOs would need to invest in infrastructure, business capabilities, and governance.

    According to it, a critical piece of infrastructure is a network of agents, stressing that these are the physical places where sub-Saharan African consumers can sign up for a mobile financial service and make deposits and withdrawals — the equivalent of the terrestrial world’s bank branches.

    Furthermore, it noted that consumer insights are among the important business capabilities, adding that this speaks to a bank or MNO’s ability to identify and develop the offerings that would matter most to consumers.