A new study shows that Kenya and Ghana have the second and third highest mobile payment usage in the world after China. This spotlights Africa’s rise in modern finance.
The report titled Five Strategies for Mobile-Payment Banking in Africa, was conducted by the American research company, Boston Consulting Group (BCG). It predicted that the overall volume of global mobile financial services transactions in 2020 is between $15 trillion to $20 trillion per annum.
Despite being constrained by a lower penetration rate of smartphones compared to the most populated country in the world, the two African countries play a significant role in underlining the value of mobile money payments as the world transitions to cashless systems.
In Kenya, transactions via mobile wallets and phones account for 87 percent of the country’s Gross Domestic Product ( GDP), according to the report, while in Ghana they account for 82 percent of GDP.
Although overall mobile transaction figures in Africa are strong, they are inconsistent across the continent.
“Kenya and Ghana, with their relatively mature mobile payments sectors, account for much of the business in Africa. In most other countries in the region, less than 50 percent of financial transactions occur through mobile payments,” the report states.
Sub-Saharan Africa’s 400 million consumers are already using mobile payment banking systems to handle Sh32.5 trillion worth of mobile money transactions, producing Sh21.6 trillion in customers’ mobile banking fees.
The survey projects that the continent’s mobile payment market could hit 650 million to 750 million customers by 2025.
“If that were to happen, mobile payments revenue, which tends to average about 1.1 percent of overall transaction volume, would rise from Sh379 billion today to between Sh1.5 trillion and Sh2.2 trillion,” notes the report.
Africa’s key market size could rise to as high as 850 million customers, supporting the volume of transactions of approximately Sh270 trillion to Sh325 trillion and Sh2.7 trillion to Sh3.2 trillion in annual revenue from financial transactions alone.
The survey recognizes that when Kenya’s telco Safaricom introduced M-Pesa in 2007, Africa became the birthplace of the concept of a mobile wallet, and that inspired the worldwide adoption of the idea with the global traction in the mobile payments space shifting to China and other geographies.
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Chinese services like Alipay and WeChat have built their mobile wallets into digital ecosystems, with billion-dollar valuations,.
“China has the highest utilization rate of mobile money, with 125 percent of its GDP transacted via mobile payments each year,” report notes.
BCG claims the figure is higher than 100 percent because it covers person-to-person transactions that are not included in GDP, such as money transfers between friends and within families. It states, however, that Africa also has this potential.
This follows African telecom companies like MTN and Vodacom’s plans to launch similar financial solutions.
“As African economies evolve, the mobile device will become the payment vehicle of first resort,” the report says.
BCG maintains that mobile payments and other telephone-based transactions are a “must-win opportunity” not just for banks in Africa to stay competitive, but also to unlock new business opportunities across sectors such as electricity, health, education and transport.
“The estimated market in facilitating payments alone is Sh54 trillion. By using digital platforms it offers the potential to develop more holistic solutions that solve deep-rooted customer friction points for African consumers,” said Tijsbert Creemers, managing director and partner at BCG. Such mobile ecosystem solutions have been highly successful in China and South East Asia, and BCG believes Africa is the next focus for fast growth.
“The other key factor is customer awareness: Africans are increasingly likely to have mobile phones and are eager for services that contribute to a higher quality of life,” Mr Creemers added.