Taking mobile banking in Africa to the next level
The use of mobile-banking services in Africa has rocketed in recent years, but the rapid advance of this type of payment technology is throwing up challenges over how to manage this growth while protecting the end-user.
The Financial Inclusion for Inclusive Growth and Sustainable Development (FIIGSD) meeting in July was held jointly between the World Bank, the African Development Bank and the Alliance for Financial Inclusion (AFI) in Rwanda.
Previous debates have centred on how to get more people banking, but talks now focused on how to make use of the new financially enabled population.
| We can only sustain this
if we make sure the products are safe and consumers are given education and recourse
Africa has been at the forefront of the mobile-banking revolution. A report by management consultant McKinsey and the Gates Foundation has forecasted that mobile payments in sub-Saharan African could reach up to $16 billion in the coming years if current trends continue across the continent.
Tanzania is one such country that has leapt forward in its plans to implement financial inclusion through mobile phones, with impressive progress made in the past four years, particularly when compared with what had been achieved in the past four decades.
“In Tanzania, 65% of the population had access to mobile phones in 2009, but only 6% were using banking services," says Benno Ndulu, governor of the central bank of Tanzania, who spoke to Euromoney after the FIIGSD meeting.
"In just four years, this has grown to 44% of all the adult population using mobile money services. There are 12.3 million adults actively using mobile money services, transacting at least once every 90 days. Half of them use the system to save, not just transfer money.”
Even those without access to a mobile phones are still capable of accessing mobile accounts with a Sim card that can be taken to a vendor, an ability which boosts the potential for increasing mobile penetration.
“As we get agents further into the rural areas and as we improve the range of products and make these services more amenable to meeting the needs of the population, [access] should be reaching 80% in the next five to 10 years," says Ndulu.
Mobile-banking technology is being adopted in different ways throughout Africa, but if there is one constant it's the growth potential for this, and particularly in enabling a larger proportion of the population to save.
For example, customers can open a savings account in just two to three hours with M-Pesa - Kenya's mobile payments system - and start saving small amounts. And once they have a savings record, they can start to get credit, which could, in turn, revolutionize personal finance for Africans and the African banking community.
Two of the biggest hurdles have been regulation and
a lack of collaboration between banks and telecoms companies. However, that is changing...
Such growth, however, is likely to bring new challenges, and the focus of mobile-banking providers is now shifting to ensure customers are receiving the most comprehensive and secure services.
Two of the biggest hurdles have been regulation and a lack of collaboration between banks and telecoms companies. However, that is changing and greater collaboration is gaining ground.
John Owens, senior policy adviser, digital financial services and financial inclusion policies at AFI, explains that the telcos are no longer being seen as disruptive, and the banks are looking for ways to work with them and harness the convenience they offer.
Standard Chartered is one of the banks that has taken a step into the space with the Straight2Bank Wallet service. Launched in Kenya is 2013, it has now expanded into Nigeria through partnering with established vendor eTranzact International. Specifically targeted at corporates, the system enables payments to existing customers and unbanked individuals.
It is not the only bank to take this step, with Kenya’s Equity now taking a telecoms licence and looking to distribute Sim cards among its customers, enabling them to bank with them without the need to visit a branch.
Growth in cross-border mobile-banking services is another area of focus for regulators, and Owens says there are now more examples of central banks starting to collaborate to support this. Earlier in the year, representatives from southern and east African countries met to discuss the regulatory challenges posed by the rapid expansion of mobile financial services.
Ndulu explains there is a need for the central banks to establish uniformity between their legislation to try to combat the difficulty of operating in multi-country regions. There are also challenges around due diligence and fraud.
Tanzania, for example, has introduced an upper limit on mobile transactions of five million shillings, around $3,000, as one way of controlling this.
The next steps for Africa, says Ndulu, will involve three key points to drive greater convergence between traditional and mobile banking platforms. They comprise the ability to expand the range of available products, the ability to reduce costs through interoperability, and the importance of protecting consumers.
“We can only sustain this if we make sure the products are safe and consumers are given education and recourse so they can benefit more from this service,” says Ndulu.