M-money: a host of challenges in an African changing market

A growing selection of products

These services, which were originally built around money transfers and recharging phone credit, are tending to expand, and there are now several levels of service available:

• Basic deposit, withdrawal and money transfer services for the unbanked, which today account for the vast majority of transactions;
• These services now extend to payment solutions in points of sale. Orange has created a partnership with Total and Shell so drivers can pay for their petrol via Orange Money. In Benin, government authorities made the use of m-money mandatory in supermarkets for any amount in excess 150 EUR, as a way to reduce the chances of robbery.
• Other related services: linked to a bank account or credit card, loan, savings and insurance offers, stock market transactions, crowdfunding, etc. In Kenya, KCB M-Pesa, the mobile savings and loan platform, created in partnership with the eponymous m-money service, issued more than 88 million EUR in loans between the start of 2015 and mid 2016. Loan amounts range from 10 and 400 EUR. Over in Ghana, Airtel has announced that it is paying its Mobile Money subscribers interest on their bank balance.
• International money transfer services with other African countries and for Europeans living in Africa, thanks to interoperable international banking systems. Western Union is still the system most used by migrants transferring money to their family back home in Africa, and charges commissions of an estimated 12%, according to the World Bank. But mobile operators are now offering alternative solutions to Western Union, as are online retailers.
• Invoice payment and payroll solutions that are often used by federal governments to pay their civil servants or pay out welfare allowances. In Ethiopia, for instance, people on welfare can withdraw their allowance from small shops, and so saving them travel time and encouraging them to open a bank account.

National and international interoperability helping drive development

There are various aspects to interoperability:

• It may be between operators or between two customers with the same operator but in two different countries. This is an area that top pan-African carriers such as Orange, MTN, Airtel or Millicom have developed, and one that gives them a competitive advantage. In West Africa, Orange offers an service between Mali, Côte d’Ivoire, Burkina Faso and Senegal, as well as a service aimed at people from those countries living in France who can now send funds to Africa via Orange Money, and so competing directly with veterans heavyweights like Western Union.
• It can also be between operators, internationally between two operators, each within their respective geographical footprint or operating in the same national market. For instance, Vodafone and MTN have an agreement that covers seven countries in Africa: Vodafone customers in Kenya, Tanzania, DR Congo and Mozambique can exchange funds with MTN Mobile Money users in Uganda, Rwanda and Zambia. This enables each operator to expand the geographical footprint of its service by using other operators’ networks in those countries where it has none of its own.
• But inter-operator interoperability is also a factor within national markets, and is vital to a market’s development, while most countries have more than one mobile money provider. This is a new phenomenon which, for now, really only affects three countries: Tanzania, Rwanda, and Madagascar.
• Interoperability with a third-party, such as a financial establishment, which might include the ability to link to a bank account. The initial target of unbanked people is thus now expanding to those who do have a bank account. Western Union and MTN have launched a service that allows MTN customers in Côte d’Ivoire and Rwanda to have funds transferred directly from one of the American company’s agencies into their bank account.

Strong outlook for value-added services

Although on a very solid footing, the m-money market in Africa is not yet fully mature: it has not taken off in all countries to the same extent, and there is still tremendous room for growth in rural areas especially.

A growing market
There were more than 150 mobile money services operating in the MEA region in 2015, most of them in sub-Saharan Africa. and even though the pace of rollouts for new services is starting to slow, usage is growing steadily: the number of active accounts rose by more than 20% between 2015 and 2016, going from 95 million to 114 million. In certain countries such as Madagascar, Tanzania and of course Kenya, m-money accounts outnumber traditional bank accounts. On the flipside, M-Pesa failed to catch on in South Africa, largely because a sizeable percentage of the local population (around 70%) has a bank account and because the banks there offer competing products. International money transfer services is another high growth area, offering much lower rates than veteran players like Western Union. Orange, for instance, is authorised to issue e-money in both Africa and France, which allows it to manage its transactions without having to go through a banking partner.

Services that target the unbanked, as well as the banked
There is still considerable room for growth in the e-money market: according to the African Development Bank, less than 25% of Africans have access to fi nancial services, a figure that is even lower in sub-Saharan Africa: only around 10%, excluding South Africa. In addition to this segment, people who do have a bank account are also being targeted for online shopping, paying for goods in brick-and-mortar shops, international money transfers and more advanced services. But services are struggling to take off in those countries where a high percentage of people have a bank account, such as South Africa where Vodacom and MTN ultimately shut down their services in 2016.

A value-added service
Mobile payment is above all a value-added service for operators: for instance, it accounted for 21% of Safaricom’s revenue in 2015, or more than 350 million EUR. Operators have high ambitions for this market: Orange had set a target of 30 million customers at the end of 2016, up from 13 million at the end of 2014. According to Boston Consulting Group, mobile financial services in sub-Saharan Africa could bring in at least 1.5 billion USD by 2019 and serve a market of 250 million people.

Regulatory obstacles
Some telcos, notably Orange and MTN, have obtained the authorisations needed to be able to issue money, and are thus competing directly with banks. In March 2017, however, the Central Bank of West African States (BCEAO) forbade Orange from transferring between with France and Mali, having ruled it an unauthorised practice. In Kenya, a bill has been introduced that would require Safaricom to spin off its m-money platform, as part of a bid to increase competition. There is also a proposal to open the M-Pesa platform up to the competition.

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