From m-money to m-banking: The evolution of mobile financial services in Africa

25 August 2015

On a continent where few have access to a physical bank and millions are unbanked, m-money has proven transformative in the way it has democratized access to financial services. At the end of 2014, 255 m-money services were operating in 89 different countries worldwide according to the GSMA. Among them 53%, or 135 of the services, were in sub-Saharan Africa. In the region, 81% of countries have m-money services.

All major African operators have developed their own m-money systems. Examples include Orange Money, MTN Mobile Money, Vodacom M-Pesa, Airtel Money and Tigo Cash. As markets become increasingly competitive, MNOs are considering new growth drivers, especially m-banking services to diversify their product portfolios and stand out from the crowd.

Three such m-banking services are savings, credit and insurance. A key example for savings is Tigo Tanzania’s Tigo Wekeza service. Launched in September 2014, Tigo Wekeza pays out a quarterly return to Tigo m-money users based on the average balance of cash in their m-money accounts. For mobile credit, Zimbabwe’s Econet Wireless launched credit facilities in 2014 called EcoCash Loan. The operator provides loans ranging from $5 to $500, depending on how much customers save in their EcoCashSave accounts. No interest is charged on the credit, but a 5% handling fee is deducted automatically from the amount received. Finally, an innovative solution for insurance is offered by Airtel Ghana. Launched in January 2014, Airtel Insurance provides free life, accident and hospital insurance to prepaid customers who make cumulative recharges of over $1.30 per month. The more the customer tops up, the higher the insurance coverage. In addition, the service allows customers to increase their coverage for a premium and to extend the same level of coverage to a family member.

We expect small and mid-size operators in Africa to also adopt m-banking services. The benefits from expanding into m-banking – for example, churn reduction and increased prepaid recharges (to qualify for a higher range of life or accident insurance) – will be a strong motivator for all operators to explore this path.

EXHIBIT: EXAMPLES OF MOBILE BANKING SERVICES IN SUB-SAHARAN AFRICA

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 Source: Pyramid Research

 

Joel Cooper, Director, Africa and Middle East

- Ousmane Yatera, Analyst-at-Large

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