ANALYSIS: Transforming African economies through mobile money services

Adoption of mobile money systems started in the mid-2000s with the Philippines, Kenya and Tanzania being among the first to do it.

The first mobile money system was launched in the Philippines in 2001.

In 2007, Kenya launched M­ PESA, which represen…

Adoption of mobile money systems started in the mid-2000s with the Philippines, Kenya and Tanzania being among the first to do it.

The first mobile money system was launched in the Philippines in 2001.

In 2007, Kenya launched M­ PESA, which represents the most successful mobile money platform.

Since then, this innovation has spread across countries.

In Nigeria, eTranzact, a financial solution company, in December 2010, piloted the scheme and started with the brand name eTranzact Mobile Money before changing the name to PocketMoni in January 2011 after it was licensed by the Central Bank of Nigeria to fully continue with the operation alongside 11 other operators.

After two decades of remarkable expansion, mobile money is now a widely-used financial service that features in the day-to-day lives of many people.

For millions of people around the world, it remains a reliable way to buy goods and services, send money to loved ones at home and abroad, purchase health insurance, etc.

Today, more money and mor
e transactions flow through mobile wallets, bringing a range of financial products into the hands of hundreds of millions of users and disrupting traditional financial services.

Based on data collected between 2013 and 2022, the total Gross Domestic Products (GDP) in countries with mobile money services (‘mobile money countries’) was almost 1.5 per cent higher than it would have been without mobile money services.

Mobile Money Operators in Nigeria, comprising the likes of OPay, Palmpay and others, witnessed a surge in transactions in the first quarter of 2024, hitting N17.2 trillion.

This is according to data released by the Nigeria Inter-Bank Settlement Systems (NIBSS).

Mobile money transactions figure for the first quarter of 2024 represents 89 per cent year-on-year growth when compared with the N9.1 trillion transactions recorded in the same period in 2023.

An analysis of the three-month data shows that mobile money transactions maintained steady growth each month.

In January, transactions valued at
N5.2 trillion were recorded, and by February, mobile money deals shot up to N5.5 trillion, while the figure went up higher to N6.5 trillion in March.

According to a Groupe Speciale Mobile Association (GSMA) state of industry report, Sub-Saharan Africa (SSA) continues to be the global leader in mobile money adoption.

The region’s sustained momentum has been largely helped by growth in Nigeria, Ghana and Senegal.

Since 2013, the number of registered mobile money accounts in West Africa has doubled, driven mostly by growth in these three countries.

This has made Sub-Saharan Africa central to mobile money’s success, as it now boasts of almost three-quarters of the world’s mobile money accounts.

Some industry experts are of the opinion that adoption of mobile money system has had a positive and statistically-significant impact on most economies’ GDP.

Mr Mats Granryd, the Director-General of GSMA, during a recent webinar organised to release the Mobile Money State of Industry Report 2024, said that mobile mon
ey was often considered an African success story.

He added that Sub-Saharan Africa had the highest levels of mobile money adoption in the world.

According to Granryd, there are 1.75 billion registered accounts processing $1.4 trillion a year, or about $2.7 million a minute.

‘In 2023, SSA accounted for $912 billion of the global transaction value, with West Africa contributing $347 billion.

‘East Africa remains the largest mobile money market in the region, with $488 billion in transaction value.

‘Mobile money’s impact extends beyond transaction volume. In the 10 years to 2022, it contributed $600 billion to the GDP of countries with a mobile money service.

‘Between 2013 and 2022, mobile money increased GDP in Sub-Saharan Africa by more than $150 billion or 3.7 per cent,’ Granryd said.

According to him, today, millions of users are making and receiving payments, taking out productive credit to meet short-term financing needs, paying for government services or accessing savings and insurance products to
protect themselves from shocks.

‘Mobile money growth has also led to a surge in mobile agents, particularly in Sub-Saharan Africa, where registered agents grew to 18.6 million, while active agents grew to 8.3 million in 2023.

‘These agents were responsible for digitising more than two-thirds of all the money entering the mobile money ecosystem: $307 billion in 2023, 12 per cent higher than the previous year.

‘The rise of mobile money penetration is closely linked to improved financial inclusion and access to digitally-enabled services in places like Nigeria.

‘Overall, as more mobile money providers have emerged, digital payment use has grown in Nigeria,’ GSMA added.

Mr Jide Awe, a science, technology and innovation policy advisor and Founder of Ltd., believes that mobile money has boomed in sub-Saharan Africa, especially in Nigeria, due to several reasons.

He is convinced that a major driver is the limited traditional banking and finance structure nationwide.

Awe says the mobile phone offers
a large number of the underbanked and financially excluded a convenient and accessible route.

He says the rapid growth in mobile phone penetration contributed greatly to enabling the offering of mobile money services.

Awe strongly believes that, as with any service, especially digital service, the proven reliability has grown trust.

He adds that this has led to wider acceptance.

‘The additional features beyond sending and receiving cash are a real driver of adoption.

‘It should be said that government has been supportive of financial inclusion with particular emphasis on mobile money.

‘The Naira cash shortage in 2023 also led many individuals and organisations to adopt mobile and digital money options in order to survive,’ he argues.

According to him, Nigeria’s tech-savvy youths are a major driver.

‘They are comfortable in the mobile and digital environment and have embraced the mobile money culture.

‘They have been active users, entrepreneurs, advocates and influencers, ‘ he says.

On job creation,
Awe says mobile money operations have significantly created direct and indirect jobs.

He explains that the direct jobs are those linked directly to mobile money operations such as mobile money agents and mobile money providers’ staff, who develop and manage mobile money services.

These, he says, include product developers and managers, information technology professionals and software developers, operations managers, and compliance and regulatory officers.

‘The indirect jobs are those not directly employed by mobile money providers but which support the mobile money environment with some as spinoffs and spillovers from the growth of mobile money,’ Awe says.

According to Awe, this category comprises marketing and advertising professionals and customer service representatives.

Awe, however, notes that there are challenges associated with mobile money operations.

He listed them to include fraud, money laundering, extortion, blackmail, physical robbery of agents, and terror financing.

‘ These are some issu
es of criminality attached to it.’

He says such crimes cause harm to mobile money users and providers and erode trust.

He equally regrets that the crimes threaten the growth and sustainability of mobile money services and the digital economy itself.

On his part, Mr Ahmed Ogundimu, a Senior Product Manager at Amazon, points out that in Nigeria, infrastructure deficit, including inadequate internet access, remains a major challenge faced by operators in the mobile money market.

Ogundimu also admits that other logistical issues also hinder mobile money operations in Nigeria.

He argues that Nigeria does not have adequate access points for financial services, adding that low quality of mobile phone service in Nigeria has made users to constantly complain of low quality of mobile money services.

He lists the complaints to include those about glitches in transactions and network interruptions.

Analysts are convinced that ensuring a strong mobile money market in Nigeria and the entire Africa is important for e
conomic transformation.

They call for more government support for mobile money system in appreciation of its impacts on financial inclusion, job creation, innovativeness and economic growth.

They also urge efforts to tackle the challenges associated with mobile money operations as well as proactive focus on digital inclusion.

Source: News Agency of Nigeria