Over the past decade, Africa’s position at the forefront of mobile money services has been widely recognised, but its ability to stay ahead of the pack has been just as impressive. 

There are more mobile money services in sub-Saharan Africa today than in Asia-Pacific, the Middle East and North Africa (MENA), Latin America and the Caribbean combined – even though mobile internet penetration in Africa remains below those regions, according to the GSMA’s (trade body for the mobile telecoms industry) Global Mobile Money Dataset.

In December 2016 there were 140 mobile money services in 39 countries across sub-Saharan Africa. The next most developed region was Asia-Pacific, with 76 services across 22 countries. 

Of the 174 million active mobile money accounts in the world, 100 million of them were in sub-Saharan Africa.

It’s not just a numbers game. Africa leads the way for innovation too. The sector started off with simple airtime purchases and person-to-person payments, with the launch of M-Pesa in Kenya in 2007 perhaps the single most significant development. In March 2017, the Kenyan government launched M-Akiba, a bond aimed at retail investors sold exclusively via mobile.
"The Western world doesn't have the problems that Africa has and, therefore, the solutions developed in Africa are hardly applicable"Since the launch of M-Pesa in 2007 the sector has evolved to offer savings accounts and loans, such as those from M-Shwari in Kenya and M-Pawa in Tanzania. Loans are often based on credit scoring that uses customers’ mobile transaction history and savings performance.

More recently, cross-border payment services have been springing up – customers of Tigo, a unit of emerging market telecommunications group Millicom Cellular Group, can make transfers between Tanzania and Rwanda, and Orange offers a cross-border Burkina Faso–Côte d’Ivoire transfer service. 

Mobile insurance products are also appearing in areas like health and agriculture. Some of these services are available in other parts of the world: in Pakistan, consumers can pay utility bills using mobile devices; in Mexico, some government benefits are paid via mobile accounts. 

But Africa clearly retains its position as the home of innovation when it comes to mobile money. Why is this and what can be learnt from it?
One giant leap for mobile bankingOne oft-cited factor explaining the continent’s initial leap forward is that most of Africa lacked widespread landline phone systems, meaning mobile network providers did not have to compete with legacy carriers when signing up customers. 

According to IFC, a member of the World Bank Group, mobile telecoms services began to roll out across Africa in the 1990s and by 2000 almost all countries had a network operator in place. The success of mobile telephones meant that, for many people, there was no need to have a landline phone at home. This is supported by research from the Pew Research Center in 2015, which found that landline penetration in the seven sub-Saharan African nations they surveyed – Ghana, Kenya, Nigeria, Senegal, South Africa, Tanzania and Uganda – was virtually non-existent. A median of 2% said they had a working landline in their house, with 97% saying they didn’t have one. 

Most Africans also did not have a bank account, in part because of the scarcity of bank branches. In 2011, 24% of adults in sub-Saharan Africa had a bank account. This went up to 34% in 2014, according to data from the World Bank.

For banks and phone companies, Africa was almost a blank slate – a gap that they have exploited. In Kenya, for every 100,000 adults there are just six commercial bank branches and 11 ATMs, but 538 mobile money agents, according to GSMA’s State of the industry report on mobile money.

“If you’re 60 or 50-years-old, or younger, you have a mobile money account,” says Mike Gama-Lobo, regional director for Africa at Finca Impact Finance, a microfinance network active in six countries around the continent. “It’s a lot cheaper and more convenient than traditional bank accounts. It’s why it’s been so successful. It’s the only game in town.”

There are other reasons why mobile banking has done better in Africa than other parts of the world. The low cost of digital technologies has allowed service providers to deal in small amounts for payments, savings and loans. These generally have less utility and resonance in richer parts of the world, for both consumers and banks. Africa is also a predominantly cash economy, which peer-to-peer payments systems can support, rather than undermine. 

In contrast, most people in developed economies already have other convenient methods of payment, such as debit and credit cards. Such legacy systems don’t necessarily stop advances in technology, but they can undermine the potential appeal of the sort of mobile money services that have found so much success in sub-Saharan Africa. Statistics show the proportion of earners who have received wages through a mobile phone in developing sub-Saharan African countries is almost 8%, according to the World Bank, while in high-income countries it is less than 1%.
Around 6% of American adults don’t have a bank accountWhere mobile payments have gained ground in the developed world, such as through Android Pay or Apple Pay, they are often explicitly linked to customers’ existing bank cards rather than stand-alone services. While there may be inertia caused by banks and others being reluctant to abandon their expensively built systems, it is also true that existing systems work well enough for most people.

“The Western world doesn't have the problems that Africa has and, therefore, the solutions developed in Africa are hardly applicable,” says Matteo Snidero, head of IT at Finance in Motion, a Germany-headquartered impact-investing firm that is active in Egypt, Morocco, Tunisia and Kenya. “People that work in developed economies have different issues with financial services. Their salary goes into their bank account; they have direct debits to pay; utility bills and standing orders to settle; a credit card bill at the end of the month. Everything is mostly friction-less and painless. The eventual problems to solve are of a very different nature than those we find among unbanked populations in developing economies, for whom even basic transactional services can be difficult.” 

Nonetheless, there are still fairly large numbers of people in developed economies that banks don’t currently connect with. A report by think tank Demos in 2016 notes that there are one and a half million adults in the UK who don’t have a bank account and whose credit history means they don’t have access to affordable sources of credit either. And, according to the World Bank, around 6% of American adults don’t have a bank account. While these are relatively large groups, issues such as poor credit history means they are also likely to be less attractive to existing financial institutions. That suggests that the best-placed institutions to target them with services may be new entrants rather than existing players. “The lessons that the West should take home from Africa are limited to the fact that there is a possible synergy between network operators and the financial world,” Matthew says. 

More recent advances are reinforcing the spread of mobile technologies in Africa in ways that, once again, are not so relevant to Western audiences. For example, advances in solar power technology are helping to spread the use of mobile phones across the continent. This is set to grow – Africa has only installed 0.9% of its solar power capacity, research from the World Energy Council shows.  
"It’s a lot cheaper and more convenient than traditional bank accounts. It’s why it’s been so successful. It’s the only game in town"In a mutually supportive process, mobile credit scoring and microloans are being adopted by companies so customers can spread the cost of solar panels in their homes on a pay-as-you-go basis, and those solar panels enable people to charge their phones easily.
It is worth noting that the success of mobile money in Africa has varied markedly from country to country. More than 40% of the adult population in seven countries – Gabon, Ghana, Kenya, Namibia, Tanzania, Uganda and Zimbabwe – now use mobile money regularly, according to a 2016 report by GSMA. In contrast, the percentage of adults actively using a digital account in Malawi is just 8%, in Benin 2.5% and in Zambia 2%, according to the Global Economic Governance programme.

Those differences are due to a wealth of factors, including mobile phone penetration rates, the reach and maturity of existing financial services, population density, the attitude of financial and telecommunications regulators, the institutional culture within telecommunications firms, and the macroeconomic environment. It is hard for services to make headway in a place like Eritrea, for example, where the mobile penetration rate is just 9%, according to GSMA. 
Sub-Saharan lessons Although the developed world has very different needs from most African economies, there are perhaps lessons to be drawn from the way some sub-Saharan countries have enabled and encouraged innovation.

A critical factor is having the right regulatory and legal environment, both to enable services to emerge and to then ensure innovation and growth continues as new technologies come to the fore. The telecommunications and banking industries have different regulators, so it is important they both talk to each other to adopt a common approach and are responsive to technological and social changes. Partnerships across different industries are also vital. The success of mobile money services in West Africa, which started with M-Pesa, could not have happened if banks and telecommunications firms had not joined together.    

The active involvement of the state can also play an important role. When governments use mobile money services it helps to increase adoption rates. There are some important secondary benefits to this: the use of electronic transactions improves transparency and the ability to detect and prevent corruption and other financial crimes, as all dealings are traceable. 

The industry is never standing still. The current wave of developments includes the evolving use of biometrics (including voice, facial and fingerprint recognition) and blockchain to enhance security and improve algorithms for credit scoring. Increased availability of cross-border transactions and the development of easier-to-use apps and other digital tools should also boost take-up.

The developed world may be on a different track, but in Africa there is a sense that there is still plenty of growth to look forward to.