BCG: Sub-Saharan Africa’s mobile-money market could grow to USD 1.5 bn by 2019
Sub-Saharan Africa’s uniqueness lies in a combination of a mostly “unbanked” population and heavy mobile-phone penetration — turning the region into an early adopter of mobile banking and a test bed for the technology’s potential, with 8 of 10 countries that make the largest use of mobile financial services hailing from Africa. (Image: Composite, MCB)
Sub-Saharan Africa’s mobile-money market could grow to USD 1.5 billion by 2019, states a research report entitled ‘Africa Blazes a Trail in Mobile Money’ from the renowned global consulting major, the Boston Consulting Group (BCG).
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, thus giving a sense of the potential market for mobile financial services.
The report goes on to state that Sub-Saharan Africa’s fast-paced adoption of mobile financial services presents banks and mobile-network operators (MNOs) with a set of strategic choices that will go a long way toward determining their success in the region.
And, this market is open not only for banking but also to other financial services. 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, the uniqueness of Sub-Saharan Africa lies in a combination of a mostly “unbanked” population and heavy mobile-phone penetration — turning the region into an early adopter of mobile banking and a test bed for the technology’s potential. Suffice is it to say that eight of ten countries that make the largest use of mobile financial services hail from Africa, and the Sub-Saharan African region holds a robust 43% of active accounts.
Another catalyst for the adoption of mobile money services is that the population of Sub-Saharan Africa is growing and becoming wealthier. The population with an individual annual income of USD 500 or more is expected to rise to more than 460 million by 2019 and such a trend is likely to strengthen as governments in Sub-Saharan Africa increasingly focus on their citizens’ education, health, and security systems to enhance potential for long-term economic growth in their countries.
“Mobile financial services aren’t new, but they’re at an inflection point and adoption is accelerating,” said Hans Kuipers, a BCG partner and coauthor of the report.
“This is not something that African banks or mobile network operators (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,” he adds.
Mobile financial services are “a way for African banks to drive and capitalise on the trend toward financial inclusion,” added Michael Seeberg, a BCG principal and a coauthor of the report.
“Failing to come up with a strategy could erode a bank’s existing customer base as even traditionally banked Africans increasingly turn to simpler and cheaper mobile offerings,” he cautions.
To succeed, banks and MNOs will need to invest in infrastructure, business capabilities, and governance with a critical piece of infrastructure is a network of agents. Consumer insights are among the important business capabilities. This speaks to a bank or MNO’s ability to identify and develop the offerings that would matter most to consumers.
Moreover, good governance is critical because of the partnerships that will be needed to create an ecosystem for mobile service offerings. Mobile financial services should not be a go-it-alone proposition; neither banks nor MNOs have everything that is needed to succeed on their own. The banks have the back-office systems and the understanding of risk and financial-industry regulations; the MNOs have the access to customers and the relationships with mobile-phone-store operators that could become a foundation for agent networks.
“The vendors that want to establish a strong market position are going to need to find the right partners and start developing an offering,” Kuipers said. “The time to do those things is now.”
And, when it comes to financial inclusion, it may be noted that Mauritius serves as a role model for Sub-Saharan Africa. The Global Financial Index places Mauritius as the most financially inclusive country in Africa with over 80% of its adults having bank accounts, far ahead of second-placed South Africa with 54% and Kenya in third place with 42%.
The infrastructure is widespread with a whopping 90% of Mauritian retailers wired to swipe cards. No surprise then that about 50% of all transactions in the country are done by cards while the other 50% is in cash. To put matters in context, 85% of all transactions globally are still done in cash and cheque, placing Mauritius firmly ahead of most in achieving the World Bank goal of a cash light economy by the year 2020.
The main mobile money players in Mauritius are the MCB with its Juice app, with its closest rivals in the mobile money space being MNOs Orange and EMTEL. Besides, Mauritius’ second largest bank by market share, SBM, also offers mobile money services through its utility payment facility – SBM BILLPAY – that has recently been extended to include mobile payment options as well.
To conclude, Sub-Saharan African economies would do well to emulate the example set by the island economy, where consumers are encouraged to open bank accounts from a young age, ensuring financial inclusion from inception.