Satellite image of Africa, showing the ecological break that defines the sub-Saharan area (Photo credit: Wikipedia)
Mobile payments, mobile wallet and NFC are seen as the next big things in the UK mobile advertising landscape. The opportunity around the use of mobile data such as GPS and payment history to allow advertisers to target potential customers dependent on where they are and what they’ve bought is much hyped. It is seen as such an opportunity that former enemies Vodafone, EE and O2 have combined forces to form WEVE, a joint venture allowing advertisers to run targeted campaigns across the 3 giant UK telecoms operators networks. Mobile payment is seen as the future. However, while systems such as NFC limp along in the UK, Africa is at the forefront of mobile payments and it is the African continent that is most likely to teach the rest of the world valuable lessons.
It is important to separate mobile banking and mobile payments. In the UK, mobile banking often refers to an extension of the services of a traditional bank ‘s services and is widely used by consumers. In Africa, mobile money has been driven by the mobile operators and allows people to transfer money, pay bills, and purchase goods and services using a mobile device, all without accessing a traditional bank account. Mobile money, often associated with Kenya’s M-PESA, is aimed at serving the unbanked, the under-banked and the under-served. Mobile payment is an extension of mobile money and involves the use of the device itself to pay for goods, and Africa is likely to see a surge in this over the next few years.
Why is Africa so far ahead of the UK in terms of mobile money and payments?
A lack of entrenched payments systems in Africa
Africa is a continent that is rich in technological innovation and some of this can be attributed to an open-mindedness, a determination, and no fixed way of doing things. There are no preconceived ideas around debit cards and credit cards being used for payment. Mobile payments have therefore seen an early adoption on the continent. Whereas there are countless ways of paying for goods and services in many parts of the world, this hasn’t been the case in Africa, making mobile money a straightforward choice for many.
A tool of necessity for the unbanked
Many Africans fall into the unbanked category and don’t have access to traditional financial services that are taken for granted in the developed world. Mobile money is therefore a ‘must have’ service for many people. It is not a question of being ahead of the curve, it is a necessity.
Minimal fees associated with mobile money
Fees charged by services such as Safaricom‘s M-PESA are minimal compared to traditional banks so mobile money is tempting for many cash-strapped Africans. Despite an increase in the fees charged by mobile money agents in Kenya over the last few months, the total value of Kenya’s Mobile Money market hit $5bn dollars in the first quarter of this year.
Geographical distances and city workers
M-PESA was originally designed as a system to pay back microfinance-loans which reduced the transaction costs, allowing for lower interest rates. However, in a country like Kenya where lots of people work in cities like Nairobi and Mombasa and transfer money back to families in rural areas, the M-PESA service became increasingly used as a mobile transfer system. The distance that often separates the main bread earners and dependants in Africa is often vast. This has contributed to the exponential increase in mobile money usage in Kenya.
The integral role of mobile in Africa. Mobile money is simply an extension
Mobile is often an essential part of people’s lives, from agriculture, health care, to education, so it’s use for payments is a natural step for many people to take. If you’re an expectant mother receiving regular SMS updates that offer pregnancy and childbirth advice, why wouldn’t you use your mobile for payments?
Lack of regulation and restrictions
Safaricom’s M-PESA system was launched with very little resistance and it was allowed to flourish without the sort of restrictions we would see in the UK. It began in an experimental way with very little marketing around it and has benefited because of the lack of bureaucratic red tape as well as Safaricom’s dominance of the Kenyan market. This dominance has also meant a simple solution, whereas in other countries the launch of mobile money products has been ineffective due to too many players in the market.
Technology seen as critical in Africa, mobile much the same
The African continent is currently undergoing a technological boom, with mobile at the center, and this entrepreneurial spirit lends itself well to mobile money adoption.
We cannot mimic all of Africa’s success with mobile money, however many areas can be ‘copied’. Indeed, M-PESA is starting to do well in other countries, including Afghanistan, and it recently launched in India. In the future, mobile payments will extend to areas over and above the transfer of money, and devices will continually be used to pay for goods and services. This is happening now and will be even more prevalent in Africa as sub $100 smartphones begin to flood the market. For this next stage to really take off, there needs to be a one system-fits-all approach across devices and network operators. There also needs to be a clear benefit for consumers to pay for goods using their mobile device such as loyalty schemes, offers and location based incentives. The future in mobile money and payment systems is likely to be driven by Africa.