Micropayment app: A customer conducts a mobile money transfer using the M-Pesa service at the Safaricom mobile phone care centre in Nairobi. Picture: REUTERS
Micropayment app: A customer conducts a mobile money transfer using the M-Pesa service at the Safaricom mobile phone care centre in Nairobi. Picture: REUTERS

It’s early days yet for mobile money, the payments technology that Africa has taken to new heights in the 12 years since it debuted on the continent. By 2017, 87-million people in Sub-Saharan Africa were active monthly users of the technology, which is largely synonymous with Safaricom’s M-Pesa.

That’s more than half the world’s total users, according to data from industry body GSMA.

But Africa’s large unbanked population means the continent is fertile ground for much bigger things.

In another five years, mobile money could evolve into a pan-African ecosystem akin to China’s ubiquitous WeChat app, says MTN group CEO Rob Shuter.

WeChat, a prized asset of Naspers associate Tencent, is a messaging, social media and payments app with more than 1-billion active users. It’s become so deeply entrenched in that society that even street vendors and busking musicians prefer mobile payments to cash — an increasingly obsolete currency.

"We’re still at the very early stages of that because the ecosystem is still so underdeveloped," Shuter tells the FM. "For example, we have 70,000 merchants registered on our mobile money system across 14 markets, and 58,000 of them are in Ghana."

However, there are some notable differences between China’s WeChat and Alipay — systems built for smartphones and a banked population — and Africa’s mobile money services.

In Africa, the system runs mostly on basic handsets, and mobile operators act as issuers of financial services accounts, unlike their Chinese technology counterparts.

Cash is convenient but not safe, and it’s costly — for the customer also
Rob Shuter

"We’ve spent 10 years building the issuing part of the business, and now we have to round out the ecosystem by building the merchant network on the other side and adding other money-in and money-out options — money coming in via salaries, casual wages, social grants and so on, and money going out for payments and remittances," Shuter says.

Facing the prospect of a long-term decline in traditional voice revenues, mobile operators are banking on a bright future for digital services, including mobile money.

"If you get it right, it can become very material," says Shuter. "Look at Tencent or WeChat — digital financial services players are not trading at six-times earnings like our industry; these are 10-to 20-times businesses.

"Mobile money can be a $1-$1.50 arpu [average revenue per user] industry. For us, it’s possible to get every market to 20% of revenue from mobile money, which has similar margins and almost no capex."

Frost & Sullivan technology research analyst Lehlohonolo Mokenela says while network operators are making progress, Africa’s mobile money market is being held back by a lack of co-operation between competing services.

But collaboration is starting to take shape and this could "unlock the full potential of mobile money", Mokenela says.

MTN will soon launch an "inter-operability hub" with France’s Orange, which has 13-million active monthly users in 17 African states.

"Unlike previous collaborations, it’s open to other mobile wallets in Africa, making it an important step in establishing an industry-wide inter-operability platform for mobile wallets," Mokenela says.

Shuter says this will fill "a missing piece of infrastructure in Sub-Saharan Africa’s mobile money ecosystem".

Linking the region’s services — including East Africa-focused M-Pesa, Zimbabwe’s EcoCash, MTN Mobile Money, Orange Money, Tigo Cash, Airtel Money and Ethiopia’s M-Birr — will help the industry reach its lofty growth ambitions.

Shuter wants MTN to have 60-million mobile financial services customers by 2020, from 25.8-million at last count. Launching the product in the group’s two biggest markets, SA and Nigeria, in the first half of 2019 could be a big step towards that goal.

What it means

A lack of co-operation between service providers is preventing mobile payments technology form from reaching its full potential in Africa

Vodacom CEO Shameel Joosub said last year that the network operator could have 50-million mobile money customers within three years.

Including its Safaricom associate, Vodacom had 34.2- million mobile money users at last count — in Kenya, Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo.

Joosub says growth will be driven by getting more Vodacom customers to take up the service and by taking M-Pesa to new markets.

Vodacom will also focus on getting each of its markets to the same level of sophistication. The Kenyan and Tanzanian operations are most advanced, facilitating person-to-person money transfers, merchant payments, international remittances, utility payments, salaries, and loan and savings products.

Shuter has similar plans for MTN, but says the operator will focus on the basics when it has another go at the SA market, which it and Vodacom abandoned in 2016.

The first time around, MTN focused too much on early-stage banking integration, says Shuter. This time, it will target the segments of the population still reliant on cash — most notably in townships.

"Cash is convenient but not safe, and it’s costly — for the customer also," he says.

Mokenela says MTN will need to establish an extensive merchant network in SA to make the service viable. "If Shoprite’s success with money transfers is anything to go by, there may still be scope for a mobile wallet such as MTN’s, but this will require a strong push to get anywhere near the levels of uptake in other parts of Africa."

Mokenela says MTN could target SA’s large African migrant population for international remittances.