There are currently over 270 live mobile money deployments globally in 90 countries. This means 270 live services, which include transferring money and making and receiving payments using the mobile phone. An increase in the deployments themselves is also something to note, with about 30 deployments housing a minimum of one million active mobile money customers. Exponential growth over the last year has been witnessed and experienced by many in the Fintech industry, with digitisation and the sophistication of the digital transactions ecosystem being the main contributing factors. There are 19 markets globally that have more mobile money accounts than bank accounts, which proves that mobile money remains a key enabler of financial inclusion.
In Africa, there is huge growth being witnessed in the mobile money industry because remote areas aren’t often accessible to banks, so mobile money acts as the provider and catalyst for consumers and businesses. In Kenya alone, one of the global leaders in mobile money, according to GSMA, mobile money adoption hit a record-breaking high between January and November 2021, with users transacting about USD55.1 billion (Sh6.2 trillion). This data was collected from the Central Bank Of Kenya (CBK), which also noted that in 2020, mobile money adoption achieved USD45.9 billion (SH5.2 trillion) in user transactions.
Data from the World Bank has also noted that Ghana has had the fastest-growing mobile money market in Africa over the last five years, with mobile phone and wallet transactions accounting for 82% of their Gross Domestic Profit (GDP). Kenya’s mobile money market has accounted for 87% of their GDP.
What Is Mobile Money and How Long Have We Had It?
By definition, mobile money is pretty straightforward; it is the movement of finances facilitated entirely through one’s mobile phone/device. There are two basic systems that dominate the majority of use cases; person-to-person (P2P) and airtime top-ups that allow continued use of networks.
It is important to also note that in the grander scheme of things, every mobile money transaction is P2P as money moves from one person or source to another, whether that’s from a customer to a business, an employer to an employee or even a person moving their own money from their own account in one country to their own account elsewhere. In Sub-Saharan Africa, mobile money was introduced between 2007 and 2010, with Kenya and South Africa being the first countries.
The Mobile Money Ecosystem
What are the actual participants in this industry, and how do they interact? Because this is still only a theoretical explanation.
The 1998 founding of PayPal makes it one of the pioneering companies. They were clever enough to keep up with the development of digital banking and evolved into the mobile money ecosystem despite initially simply operating from their website. They continue to be one of the most widely used P2P payment platforms, but their software may also be used for online and in-store transactions.
The issue with such providers is that they rely on you linking your account with them with a bank account, which is problematic for unbanked populations—typically people residing in rural areas, particularly across Africa as well as in India and China, among other places. However, several P2P payment apps and services, like RedCloud, ZipCash, and others, do not have this requirement.
Using a mobile-only bank is an alternative to P2P platforms for the unbanked. The main participants in this scenario are Monzo, Starling, and Tandem, among others. Another choice is to use a digital wallet, which you can fund with cash at nearby merchants. It is this vital service that has helped the mobile money ecosystem thrive in isolated areas of Africa. The likes of MFS Africa are leaders in digital payments, ensuring consumers gain access to transacting with or without a mobile device. These systems can also be utilised as a link between banks, credit cards, and the services you want to pay for with your mobile device, enabling both in-person and online transactions. Apple’s own Wallet, Android Pay, Google Pay, and Yoyo are a few of the players in this market.
An ecosystem is not just a list of unconnected participants, though. It is the interactions between them that make for an effective system. In the mobile money ecosystem, as with virtually any financial network, a certain amount of trust is necessary.
As one might anticipate, the mobile money issuers are at the centre of the ecosystem. There is nothing available to spend on products and services since there is no way to add credit to the economy. Since the issuer cannot exist without the mobile network operators, an agreement between the two parties is the initial prerequisite. In order to guarantee that the credit in the system has some real value behind it, the money issuers also need to have strong ties to traditional banks, perhaps through challengers or neobanks. To guarantee that the bank will complete the transaction when a consumer uses that credit, both the issuer and the bank must establish payment agreements with vendors.
It’s important to remember that these arteries can clog, proving that the system is not perfect. It depends on widespread acceptance, particularly from vendors and business owners. Similar to the issue that Bitcoin initially had, early adopters discovered that there was no place to spend their cryptocurrency once they had changed their cash into it. Of course, as more businesses accept other payment methods, this issue is progressively getting better in both situations. The fact that the ecology is so complicated and dependent on so many different connections is the bigger issue. Each adding its own service charges makes it simple to lose substantial sums of money on each transaction.