In Sub-Saharan Africa, mobile money is now essential to boosting financial inclusion. Because of the innovative mobile network operators in Kenya and other countries, East Africa used to be the core of mobile money. 

The availability of these services has expanded recently, to the point where by 2022 all 12 economies of the world are located in Sub-Saharan Africa, and more adults there have mobile money accounts than bank or other similarly regulated financial institution accounts.

In 2022, 28% of the adult population in Sub-Saharan Africa had a mobile money account on average. Although mobile money is not yet widely accepted in some economies, it is more of a minority rather than a common occurrence.

In 20 of the 36 economies studied, at least 30% of the population has mobile money accounts. Considering that 13% of people in emerging economies own mobile money accounts on average, this is even more impressive.

Reaching the Unbanked Population

The region's economic framework, primarily reliant on cash transactions within informal markets, has posed challenges for banking services to adapt. In 2022, over two-thirds of payments from individuals in South Africa were conducted using cash, even though 85% of the population had bank accounts. Meanwhile, some additional issues, including concerns about fraud, delayed settlements, and comparatively low financial literacy, are impeding the growth of banks throughout the region.

Mobile money is effectively tackling these problems. These services offer simplified processes for getting started and access through Unstructured Supplementary Service Data (USSD), a coded mobile communication protocol that relies on text messages rather than an internet connection.

They receive backing from 2G and 3G networks that serve over 80% of the population in the area. Major telecommunications companies support the rollout of mobile money services, providing enhanced safety, cost-effectiveness, and instant transactions.

A Push to Cashless Transactions

Mobile money services have developed from peer-to-peer (P2P) transactions to cash-in and out transactions that enable purchasing goods and services as demand grows and operators keep innovating.

More unbanked people can rely on mobile money transactions online because of increased internet penetration and the introduction of reasonably priced smartphones. This has resulted in a 29% increase in e-commerce value growth in sub-Saharan Africa by 2022. 

Mobile money opens new avenues for understanding consumption trends and making payments easier. B2B and B2C companies have utilized transaction analytics to improve customer experiences, develop targeted marketing strategies, and build brand loyalty.

Telecoms are Driving Growth, but FinTech will become More Important

Fintechs will become more significant, but telecom corporations will probably continue to drive growth in consumer electronic payments. In Africa, mobile money has completely changed how consumers make purchases. 

Due to their introduction of cutting-edge payment solutions and other value-added services to their sizable client bases, telecom companies have played a significant role in driving the expansion of payments in Africa over the past ten years through mobile money.

This pattern is anticipated to persist. Consumers have already transitioned from basic mobile money (Wallets 1.0), which mainly provided cash in and cash out, and peer-to-peer (P2P) transfers, to Wallets 2.0, which offers more comprehensive financial services like bill payments, savings, loans, and insurance. 

Wallets 2.0 is starting to show signs of improvement, Wallets 3.0 will be feature-rich wallets with access to services, in-app purchasing, and connection with online retailers, marketplaces, and platforms as a checkout option in addition to the basic financial services.

Small Businesses Get FinTech Push

Around 80-90 million SMEs in Africa still represent a huge unrealized potential in the payments industry. Recent growth in African payments has been largely attributed to FinTech innovation-driven, merchant acquisitions and related offerings. 

Specialized FinTech consulting firms will be at the forefront of assisting small and medium enterprises transition from traditional offline sales to online e-commerce, as reported by 37% of survey participants. The survey anticipates that within three years, a minimum of 25% of SMEs will have a digital footprint.

A Driving Force for FinTech Innovation

Mobile money is becoming a driver for innovation as central banks lower entry barriers in the financial sector, creating space for diverse revenue streams across new services like insurtech and microloans. Orange Bank Africa used this opening to introduce nanocredits in Côte d'Ivoire. 

By 2025, the company hopes to have provided these loans to 10 million customers in Senegal, Mali, and Burkina Faso. In keeping with this, MTN partnered with Sanlam in 2022 to expand access to Ayo Insurance, a reasonably priced microinsurance program aimed at self-employed and informal workers in Ghana, Uganda, and Zambia via mobile money services. By 2025, the strategic alliance hoped to achieve 30 million users.

Mobile Money Adoption Comes with Consumer Protection Risks

Every initiative to increase financial inclusion through the use of digital connectivity and mobile money accounts should be complemented with initiatives to safeguard consumers. Digital skills are necessary for digital financial services like mobile money. These include the capacity to handle passwords, activate digital wallets or accounts, transit user interfaces, and use authentication systems. 

Consumer concerns include lack of clarity regarding costs and other conditions of service, pushy marketing, inadequate dispute handling, identity or data theft, mobile app fraud, and other dangers. These risks are not new; bank accounts already carry them, but the accessibility and ease of use of mobile money have made them more significant.

For instance, according to Global Findex 2021, a sizeable portion of account owners who had their wages deposited directly into their accounts had to pay unforeseen costs. Of these adults, 5% in Cameroon reported having to pay surprise fees. We're not sure if those were unofficial fees or if the user just didn't comprehend the charge schedule, but both scenarios suggest that there could be room for abuse. Women may be more susceptible to paying unexpected fees and experiencing other sorts of exploitation since they frequently lack prior financial knowledge.

Conclusion

In Sub-Saharan Africa, supervisory agencies and financial regulators must enhance supervisory monitoring systems to detect and measure the numerous financial risks prevalent in the market, particularly with the increasing use of mobile money. Enforcing suppliers to take action to guarantee that mobile money users comprehend all product features and fee disclosures is likewise crucial.