- Ghana has launched a universal QR code that enables all Ghanaians to pay merchants instantly from their mobile money wallets, bank accounts or international cards.
- The United Nations notes that providing unbanked Africans access to banking services can immensely boost economic growth.
- The Pan-African Payment and Settlement System (PAPPS) paves the way for the harmonisation of other payment systems which will improve service delivery and lower transaction charges.
In a continent that has struggled with financial inclusion, it is evident that mobile money can open up the economy to a wider range of individuals.
With this, the system can serve as the foundation for more advanced kinds of e-commerce.
If there are lessons to be derived from the Covid-19 pandemic, it is that the mobile phone is helping the world transcend boundaries- including financially- in a way that has not been witnessed before.
However, this is only possible if there are continuous innovations in the mobile money sector.
Despite M-Pesa being the pioneer in Africa, Ghana has beaten the East African nation to become the first African country to launch a universal QR code that enables all Ghanaians to pay merchants instantly from their mobile money wallets, bank accounts or international cards.
2020 saw many innovations, partnerships and collaborations in the fintech sector as people sought solutions for cross border payments due to the pandemic.
The State of the Industry Report on Mobile Money 2021 by GSMA notes that registered mobile money accounts in Africa passed the half-billion barrier mark with ease. With 43 per cent of all new accounts opening in 2020, Sub-Saharan Africa maintained the lead in mobile money services as it has done for more than a decade.
There were 548 million active accounts in the region by the end of 2020. Out of these, more than 150 million accounts were active monthly. However, while West and East Africa increased the most in absolute terms, Southern Africa’s growth rate of 24 per cent was the fastest in the pandemic.
What lies ahead in Africa’s mobile money sector?
The United Nations notes that providing unbanked Africans access to banking services can immensely boost economic growth. This success would even be more pronounced if banking access is given to women and people living in remote parts of the rural areas.
In 2020, total transaction values climbed by 22% to hit US$767 billion. or the first time, and in a pandemic, the industry is processing more than US$2 billion per day which has more than doubled since 2017.
The GSMA predicts that by the end of 2022, this value will be in excess of US$3 billion every single day. Some of the innovations that will help propel this growth include APIs and regulation initiatives like tightening transaction and balance limitations which could bolster the industry’s transaction values growth.
Transaction costs remain a big concern for many with users calling for a review of this in countries like Kenya. When the pandemic was announced in Africa, Kenya and Ghana- which also happen to be the continent’s two biggest mobile money markets– were swift to scrap fees on small person-to-person transactions.
In keeping up with the needs of the time, other African countries implemented regulations that allowed tax relief for mobile money and fee limits. These reductions worked by ensuring that there was more money in the pockets of those who needed relief at the time.
While profits for M-Pesa dropped with the reduction of the fees, the company soon after sprung into profitability after the resumption and reinstatement of the transaction fees. But, there is disquiet.
Using M-Pesa as an example, people are seeking cheaper options where they get the most value from their money. This means that for the service providers to continue enjoying their dominance, they have to make the services affordable. The debate to have the transaction charges are on noticeable on social media with people complaining about duplicated charges for the same amount. For instance, M-Pesa charges one to send money and the recipient is charged to withdraw the same money.
To put this in perspective, sending KShs. 20,000 (US$200) costs a dollar for the sender while the recipient pays almost US$2 to withdraw the same amount.
The contention with many, if not addressed, remains a loophole for the company and which other innovators could jump on to offer the sought services.
Looking ahead, the pandemic has sparked proposals for uniform cross-border laws to improve money flow and market security measures like Know Your Customer (KYC).
There is no centralized regulatory platform the various African markets are unique but having a pan-African mobile money system will encourage competition and benefit the market.
Moving towards this goal and as part of the African Continental Free Trade Area (AfCFTA), the Pan-African Payment and Settlement System (PAPPS) paves the way for the harmonisation of other payment systems which will improve service delivery and lower transaction charges. Hopefully.
When Covid-19 came, it affected everyone in different ways. As is the case with most disasters, the most vulnerable were the hardest hit and disproportionately affected. The pandemic has exacerbated already existing inequalities by amplifying them.
With the mobile phone, many cases that would have been fatal were mitigated by the innovative nature of the mobile money ecosystem. With more than 1.2 billion registered accounts and 300 million monthly active accounts, it was easier for the distribution of pandemic relief payments which was swifter, safe and efficient.
While this has been proven as a success, the prohibitive costs of sending money or withdrawing it may deny many the chance to improve their livelihoods since less money than they could actually receive gets into their pockets.
Looking at diaspora remittances, mobile money providers in Africa will lose a large section of the market as the costs keep out those who would bump up their customer base numbers.
The mobile phone is being used to address many of the socio-economic and development concerns coming from the epidemic. The cost price of sending and withdrawing money should improve in line with the need to ensure that the vulnerability of the most affected is not worsened by the cost of convenience.
Worldwide there are 5.2 billion mobile users and the mobile phone sector offers the reach and innovation necessary to further financial inclusion while creating more equal communities. Digital pioneers are helping with the delivery of life-changing technologies which, if rightly priced, will create equal opportunities for all.