For most African businesses and the populace at large, cash is king, owing to the continent’s developing electronic funds transfer systems and the slow uptake of technology-based remittance and payments platforms. But experts believe that the growing integration of telecommunications and banking in most African countries, as well as the continued revamping of platforms enabling electronic funds transfers, is helping mobile money to catch up to cash in terms of popularity.
Although still seen as king by most business people on the continent, carrying out transactions and buying goods and commodities using cash presents many challenges and pitfalls, including the risk of theft and armed robbery. Innovative application developers have come forward with applications aimed at reducing these and other cash associated risks. Most of these applications ride on mobile phones and are propped up by the fast-growing idea of mobile money. A recent study by Gartner shows that mobile payments globally will top $720 billion a year by 2017 – a significant increase from the $235 billion that was processed through such platforms during 2013. Gartner added that the potential upside is immense, as consumers made $15 trillion worth of retail transactions in 2013.
BitCoins to Shillings
BitPesa is a digital remittance company focused on changing BitCoins into African currencies. Bitcoin is a decentralised digital and internet-based currency that is used for online purchases and payments as well as money remittances. Bitcoins use peer-to-peer technology to operate with no central authority or banks. The value of the BitCoins is paid straight into the mobile wallet of recipients in Africa. The company is currently operating in Kenya and hopes to expand into the rest of Africa soon. Elisabeth Rossalio, co-founder and senior executive at BitPesa, says there are various problems to consider when operating a cash-based business or travelling with cash, which has necessitated the development of new platforms. “We have even gone beyond that, as we are among the first to bring usage of digital currencies in Africa through BitPesa,” she said, adding that further advantages of digital currencies are that they are Internet-based and also decentralised.
“The technological advancements behind digital currencies and mobile financial services will drive down costs of remitting money, even for the traditional money remittance and money transfer service players,” said Amy Ludlum, the head of trading and risk management at BitPesa, in a presentation at the Mondato Africa summit on mobile financial services. Efforts are now underway to further develop and integrate it into a deal with major airlines and hotels to offer a pre-payment facility.
Mobile money growing, but retail sector lagging in adoption
Mobile money is one of two areas, including data, that industry executives see aspresenting immense growth opportunities for telecom companies in light of declining volumes from the voice telephony category as well as fast developing tech trends that are likely to lead to increased usage of plastic money and digital currencies. Mobile network operators in Zimbabwe are significantly shifting their attention to mobile money and are instituting new innovations such as credit cards that allow mobile money users to withdraw money in their e-wallets from Automated Teller Machines (ATMs). Nkosinathi Ncube, the head of mobile money for Telecel Zimbabwe said his company is now focused on driving up transaction volumes on its Telecash platform and also revamping it so that it can be useful for retail shoppers.
Andrew De Wet, the CEO of SA price comparison website, PriceCheck – which has since expanded into Nigeria under a partnership with MTN – said that 40 percent of buying happens on mobile devices and underscored that using mobile money and electronic-based transactions enhances convenience as well as the safety of shoppers and travellers.
Retailers in Zimbabwe, including Pick n Pay and OK Zimbabwe – the two biggest operators alongside TM Supermarkets which is 49-percent owned by Pick n Pay – mostly rely on cash purchases by shoppers. “Mobile money has been struggling to make a mark on the retail sector,” Ncube said when the company launched its credit card for the Telecash mobile money platform. Econet Wireless, which operates the EcoCash mobile money payment platform, launched a credit card in partnership with MasterCard at the end of July. CEO Douglas Mboweni said that his company is revamping its strategy to tap into mobile and e-commerce.
Research company Frost and Sullivan said in July in a new research report that Ethiopia and the Democratic Republic of Congo (DRC) stand to benefit greatly from the strong potential that mobile money presents for African telecommunications sectors. “Mobile money will grow in prominence as the number of Ethiopia and DRC’s unbanked populations have prompted their respective governments to place financial inclusion at the forefront of their socio-economic plans,” said Frost and Sullivan ICT analyst, Lehlohonolo Mokenela.
Mobile money key to increasing financial inclusion
Mobile money is set to play an even bigger role for most African economies, especially with the skilled population of Diaspora Africans abroad who want to send money back home. Judah Levin of Mondato Africa believes that the mobile financial services market in Africa is still a “very multi-tiered market which provides opportunity for both niche providers and those looking to achieve scale through network effects”. Raadhika Sihin of MasterCard says remittances from international destinations are becoming larger than foreign direct investments in Africa. “Investments in most African countries contribute to education and poverty alleviation,” he said. Traditional money remittance services such as MoneyGram and Western Union are said to be expensive, taking up to 12 percent of the money sent in charges. “Mobile money seems to be a platform that can go across barriers in financial inclusion, although cash is still king in most of Africa today,” Sihin said. Platforms offered by MoneyGram and Western Union are, however, not likely to disappear sooner as they still play a vital role in the cash-based money transfer sector across the world, though they may be forced to adapt their services to encompass receipt of cash on mobile phone wallets.
It is not all smooth sailing, however, and there are a few hurdles to overcome before mobile money can take-off in full force and be wholly embraced by the African populace. According to Sihin, “a lack of trust in using a mobile device” was cited as one of the reasons for sluggish growth of such platforms. And it may not be long after all before mobile money – the heir apparent to king cash – takes over.
By Tawanda Karombo
This article first appeared in the Ventures Africa magazine, Volume 11, 2014.
