On the demand side, customers in Africa are increasingly likely to have mobile phones and to be eager for better access to essential services, particularly those involving comprehensive solutions that make life easier. On the supply side, we’ve seen the emergence of technologically enabled business ecosystems-groups of enterprises linked through digitally based platforms that make it easier for them to collaborate dynamically with other enterprises and remove much of the friction involved in joint ventures and other cross-boundary collaboration. But two dynamics make it is feasible for them to take the lead. To be sure, most African banks do not have much direct experience with mobile payments. And as Clayton Christensen documented in The Innovator’s Dilemma, establishing a new adjacent market makes it much easier to disrupt and overtake more-established markets. Outside competitors will gain not just revenue this way, but invaluable customer data as well. If the banks don’t provide these services themselves, technology-driven competitors from Africa, China, or elsewhere could capture the market instead. The prospects of recovery suggest that people will be looking for improved services from their retail institutions. The COVID-19 crisis has rapidly raised peoples’ interest in contactless transactions. Mobile payments represent a must-win opportunity for African banks, for several reasons. ![]() This type of mobile payment innovation could find fertile ground when it returns to Africa. During the past decade, these firms have developed their mobile wallets into digital ecosystems with billion-dollar valuations. Tencent, another Chinese giant, launched its mobile wallet service WeChat in 2010. In 2008, the giant e-commerce store Alibaba launched a mobile payments system using QR codes through its Alipay division. The model spread to other parts of Africa (MTN in Uganda and Orange Money in Côte d’Ivoire), to India, to Eastern Europe, and to China. Another Kenyan company, M-Kopa (from kopa, meaning to ask) uses a similar app-based system to finance home solar energy devices. ![]() The company expanded the service under the name M-Shwari (from shwari, the Swahili word for calm) to offer savings accounts and micro-loans. The resulting mobile wallet model provided a viable alternative to inefficient and unreliable telecommunications services, and offered broader access to financial services, including person-to-person fund transfers. With a grant from the UK’s Department for International Development (aimed at facilitating microfinance), the company launched a service called M-PESA ( m for mobile, and pesa, the Swahili word for money). In 2007, executives at the Kenyan mobile network operator Safaricom (affiliated with the global telco Vodacom) noticed that customers were using prepaid airtime as currency. The history of mobile payments in Africa helps explain the current opportunity. In the mid-2000s, Kenya and Uganda were the first countries to introduce mobile payments. But it is also a path with African precedent. This is a challenging path, however, and it requires many banks to gain new capabilities. They also represent a path to success for many retail banks and financial institutions. Stories like these illustrate the potential future of mobile payments in Africa. This offering from the bank has enabled her to expand her customer base, and she can now save some money each month, for the first time in her life. “My daughter’s health has improved.”Ī third uses a smartphone to receive payments from vendors for her craft business. “My children no longer have to rush through their homework before dark.”Īnother customer has set up automated insurance payments for appointments at a local medical clinic. ![]() It powers a water pump for irrigating the customer’s microfarm and includes a light bulb socket.
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