Africa’s Mobile Money Evolution

Africa is indeed the last remaining frontier of economic boom. With this in mind many citizens in Africa care less of owning a bank account. In light of this development cellular network operators came up with an idea that will enable its subscribers have access to a platform that can easily operate like a bank account with ad-on features. This came to be known as mobile money.

The idea behind it however started in 2002 when a Department for International Development UK, funded researcher at Gamos and the Commonwealth Telecommunications Organisation, found that citizens in Uganda, Botswana and Ghana were spontaneously using airtime as a proxy for money transfer. They did this by reselling airtime transferred to them by their relatives and friends outside their home countries.

Based on this the researchers approached MCel in Mozambique, and in 2004 MCel introduced the first authorized airtime credit swapping – a precursor step towards M-Pesa. The idea was discussed by the Commission for Africa and DFID introduced the researchers to Vodafone who had been discussing supporting microfinance and back office banking with Mobile phones.

Through a series of piloting, changes were made to the initial design and later in April 2007, following a student software development project from Kenya;Safaricom launched a new mobile phone based payment and money transfer service, known as M-Pesa. The service allows users to deposit money into an account stored on their cell phones, to send balances using SMS technology to other users, including sellers of goods and services, and to redeem deposits for regular money. Users are charged a small fee for sending and withdrawing money using the service. M-Pesa has spread quickly, and by 2010 had become the most successful mobile phone based financial service in the developing world. By 2012, a stock of about 17 million M-Pesa accounts had been registered in Kenya.

After the success story of M-Pesa in Kenya several telecos in Africa started adopting this into their services. In Uganda, South Africa telecoms giant MTN launched its own mobile money in 2008. The service contributes about 15 percent of the total revenue of MTN Uganda and as much as a fifth of the country's economic transactions are done through MTN mobile money solutions, said an MTN executive. Two years later MTN again launched the mobile money service in Cameroon.The service according to international regulator and most users have brought immense benefit to Africa as a whole. The benefits include convenient savings, ease of use, bringing the unbanked into a virtual banking, transformation of the economy among others.

Despite the transformation of mobile money services in Africa, there have being a few challenges that have handicapped the total success of the service.

In Kenya for instance M-Pesa customers have reported cases of fraud. Most rural women in Kenya have lost money to third parties whom have failed to honor their side of a deal. M-Peas however have emphasized several tips to prevent such occurrences.

Connectivity problems also possess a challenge to the success of the services. In most rural areas where users cannot access the telecommunication services, the use of mobile money is handicapped. Moreover areas with poor network coverage cannot enjoy the full benefits of the service. Despite this most telecos are embarking on mass campaign to roll out their services nationwide.

Industry players say a fragmented and tough regulatory environment is holding the industry back. Also many users lack the technological skills needed to use the service.

Consulting firm McKinsey said in a February report that mobile money had failed to catch on quickly even in areas of Africa where relatively few people have bank accounts.

"This is partly the result of uncertainty about whether Kenya - where M-Pesa has become one of the few mobile-money success stories - is unique or the potential for mobile payments in other markets is similarly robust," it said.

At the end of last year, there were more mobile money accounts than bank accounts in nine developing countries mostly in sub-Saharan Africa, mobile industry lobby group GSMA said.

About 61 million active mobile money customers were using the service globally, up from 37 million in 2012, GSMA said.

About 61 million active mobile money customers were using the service globally, up from 37 million in 2012, GSMA said. The potential is vast: 2.5 billion people in developing countries lack access to banking services, yet one billion of them have a phone that would allow them to use the mobile money service.

In Kenya, M-Pesa has 13 million active customers. Transactions grew 22 percent and contributed 26.6 billion shillings ($303 million) or nearly a quarter of Safaricom's revenue in the year to March 2014.

French telecom operator Orange, which runs Orange Money, has seen significant growth with about 10 million customers worldwide, most of them in the West African CFA franc zone.

Thierry Millet, vice-president for Orange Mobile Payments and Contactless, said the total value of mobile money transactions made on its networks topped 2 billion euros ($2.7 billion) last year and is expected to exceed 4 billion in 2014. He did not specify how much revenue this generated for Orange.

In Uganda, South Africa telecoms giant MTN launched its own mobile money in 2008. The service contributes about 15 percent of the total revenue of MTN Uganda and as much as a fifth of the country's economic transactions are done through MTN mobile money solutions, said an MTN executive.

In Ghana operators have devised a means whereby users can easily pay for utility, school fees and also receive their salaries through the service. However a lot of public education is needed to intensify the use of the service.

About writer
Obed Appiah-Danquah
http://obedapp.blogspot.com
REFERENCING
1. Money In Motion: 7 benefits of Reasons Why mobile money is the Future-Business-Nairaland- www.nairaland.com/1299576/money-in-motion-7-benefits-reasons.

2. Mobile Money: The Battle for Africa-Frontier Markets News- Emerging & Growth Markets- WSJ- www.blogs.wsj.com/frontiers/2014/09/03/mobile-money-the-battle-for-africa/

3. M-PESA responds: Benefits and Challenges of using mobile money to reduce poverty for women in Kenya(Mobile for development)- www.gsma/com/moblefordevelopment/m-peas-responds-benefits-and-challenges-of-using-mobile-money-to-reduce-poverty-for-women-in-kenya

4. M-Pesa - Wikipedia, the free encyclopedia-http://www.en.wikipedia.org/wiki/M-Pesa (retrieved on 4th September, 2014)