FinTech and mobile solutions have been able to expand the reach of SMEs through digital payments, making it possible for them to attract a larger customer base and this includes population that may not have access to banking services, explains Eric Karobia at Whizmo.
Africa, a continent where only 48% of the population has access to traditional banking services, has emerged as a global leader in mobile money solutions, constituting 70% of the world’s $1 trillion mobile money market. What began in Kenya in 2007 as a revolution to address the unavailability of traditional banking services, has now become the most preferred medium for transactions in over 96% of households in Nairobi, impacting lives and economies one mobile money transfer at a time.
The relevance and usage of these solutions grew significantly over the years, with Africa hosting over 166 live mobile banking services, and 763 million registered accounts that facilitated 44.9 billion transactions worth $836.5 billion in 2022. By offering vital services such as basic Peer-To-Peer, P2P money transfers, savings, loans, and insurance, these solutions addressed critical issues for the underserved and unbanked population across the continent.
SME opportunity
In Africa, Small and Medium Enterprises, SMEs play a vital role in driving economic growth and job creation, consequently contributing to around 80% of jobs across the continent. Nevertheless, accessing traditional financial services often remains a challenge for these entities, significantly slowing down their progress. In such cases, mobile money solutions came up as vital drivers of growth, empowering these enterprises and propelling their development.
Mobile money solutions have been able to expand the reach of SMEs through digital payments, making it possible for them to attract a much larger customer base. This also includes a large percentage of the population that may not have access to traditional banking services.
As a result of tapping into these markets, SMEs were able to increase their sales, revenues, and drive the overall progress of their business. While gaining access to loans continues to serve as a necessity for the growth and development of SMEs, mobile money does iron out a lot of other hurdles.
The active adoption of digital payments amongst SMEs has dramatically improved their efficiency. This became a reality not only because of the fact that this new medium of receiving money minimised the risks and hassles related to dealing with larger amounts of physical cash, but also because it provided them with improved transparency , and a lot more control over their money.
Having navigated through their early stages with the help of mobile money solutions, SMEs are able to win the trust of traditional financial institutions. With increased credibility, they are then able access additional funding for further expansion, cementing their position as vital drivers of economic growth at the grassroots level.
The pandemic played a massive role in enhancing the popularity of mobile money solutions and reaffirming their unique advantages. According to reports, post-pandemic, the reliance on mobile money solutions shot up remarkably to 84% of the population in Kenya, 70% in Somalia, and 60% in Nigeria, underscoring the significance of the solution in the continent’s economic landscape.
Leveraging telecom platform
A vital contributor to the success of mobile money solutions in Africa much before they became relevant and used across the rest of the world was the in-depth understanding of the unique dynamics of the local market.
By carefully analysing the infrastructure available, mobile money service providers customised their strategies, offerings, and mediums of providing their solutions to easily integrate with the existing resources, while effectively catering to the needs and wants of the people.
Over 17 years ago, when Internet connection and smartphones were rare, telecom service providers took advantage of the wide-spread availability of feature phones and SIM cards to offer their solutions via SIM Menu or Unstructured Supplementary Service Data, USSD.
As a result, a significant percentage of users could easily pay for their child’s school fees, house rent, groceries, and much more, with the help of a simple SIM Menu or by dialling a specific USSD code to initiate a real-time session with the service provider, allowing them to carry out transactions by selecting an option from a menu displayed on their screens.
As the number of mobile money solutions grew in number and expanded their reach across the continent, this unique approach truly redefined the way in which transactions could be done, driving community empowerment and involvement.
Moreover, for the successful expansion and adaptation of mobile money solutions, it is necessary to have an insights and data driven approach. By gaining critical insights from consumer data, mobile money service providers are able to fine-tune their offerings and align them with the more specific needs of the users.
This assists them in the development of a more individualised and relevant solution. Having a personalised approach does not only help meet the immediate financial requirements of the consumers, but also leads to fostering loyalty.
Digital payment solutions
In addition to the simplicity of transactions that mobile money solutions offered, the wide adoption of these services across Africa was driven by the reliability and security that came with them. These solutions proved to be extremely successful in making transactions more agile and convenient, while providing users with a lot more transparency and control over their money.
Moreover, mobile money solutions successfully bridged geographical distances, and ensured accessible and seamless monetary exchanges regardless of time and location.
As a result of the safety and ease provided by these solutions, Kenya quickly emerged as a global leader in adopting digital payments, with mobile wallet transactions across the country accounting for over 87% of the nation’s GDP in 2021.
A strong understanding of the masses served as the primary reason behind the expansion and growth of mobile money solutions in Africa. This understanding paved the way for mobile money service providers to prioritise the needs of the people they were catering to, and accordingly offer services that are not only relevant, but also easy to navigate.
With the help of a user-centric design and the usage of simple and easy to understand language, service providers across the continent were able to make sure that even those with limited digital literacy could effectively use and benefit from their solutions, which were otherwise complex in nature.
These service providers understood the fact that 32% of the population in Sub-Saharan Africa is illiterate, and did not let that become a hurdle for them in accessing their solutions.- The simplicity of these services encouraged a larger portion of the population to engage in financial transactions seamlessly and effectively. As a result, mobile money solutions emerged as key drivers of financial inclusion and community empowerment.
The developing as well as the developed markets around the world can gain valuable insights from the mobile money landscape in Africa. While the continent continues to innovate, it would be safe to say that the potential for growth in the mobile money solutions segment is endless.
Having fostered economic growth, community empowerment, and financial inclusion, the significant impact of mobile money solutions can never be understated. With the help of this transformative solution, Africa is not only taking part in making the global digital economy a reality, but is definitely leading it.
