Changing lives with mobile banking

Mobile banking is transforming people’s lives all over Africa. According to the World Bank, 350 million unbanked adults live in Sub-Saharan Africa and the ability for them to send, receive and transfer money via mobile devices has been revolutionary.

Until now those ‘unbanked’ citizens – people without access to banking services – have experienced continued financial instability. They did not have the means to save for the future, borrow in times of need or even receive their salary conveniently at the end of a month.

For over a decade, mobile technology has changed the way we make financial transactions. When SMS arrived, it gave banks an all-new way to interact with customers. However, the unstoppable smartphone and mobile broadband revolution has really seen mobile banking go mainstream.

A global phenomenon

Mobile banking is a global phenomenon. In the UK for example, British citizens have embraced mobile banking in their droves, with payments via banking apps rising by 54 percent in 2015, according to the British Bankers’ Association. There it has impacted on high street bank branches, with customer visits declining by 32 percent since 2011.

The market dynamic on the African continent is different, however, because few citizens had the option of going to a bank branch in the first place. Mobile banking allows them to leapfrog this step and have 24-hour access to banking services no matter where they are. It generates very little paperwork, something that is good for the customer, the bank itself and of course the environment. In addition, costs are kept to a minimum for both the provider and customer.

Back in 2006 M-Pesa, the continent’s first mobile phone-based money transfer, financing and microfinancing service, launched in Kenya. It grew quickly, racking up 2 million customers in its first two years, and reaching almost 20 million customers by 2013. Other similar schemes have launched throughout Africa along the way, leading to there being around 84 million mobile money accounts in Africa by December 2016, according to the GSMA.

These simple services required only a basic feature phone, making take-up quite straightforward. In addition to simple money transfer actions, they enabled Africans to have savings accounts, pay for utilities bills like solar power, take out loans and even allow small businesses to accept mobile money payments at cash registers.

Still challenges to overcome

The total value of mobile money transactions in sub-Saharan Africa reached $655 million in 2014 and according to Frost & Sullivan could exceed $1.3 billion by 2019. Of the top 20 countries in the world for mobile money usage, 15 of them are in Africa according to research carried out by the Gates Foundation, the World Bank and Gallup World Poll. But while mobile money has undoubtedly been a boon to the continent, there are still questions to answer.

Smartphone penetration throughout Africa is rising but still not as dominant as in other markets. In 2016, the Nigerian Communications Commission (NCC) said that there were around 722 million mobile phones in Africa, of which only 18 percent were smartphones.

While Africa continues to make the shift to higher smartphone penetration, millions of people still carry out their banking with basic feature phones. SIM application toolkits (STK) offer limited functionality via text-based menus that give users secure access to airtime balances, news, please call services and more, and traditional SMS enables basic mobile banking services.

Interoperability is another challenge. The industry needs to ensure that all various mobile money providers’ services are interoperable to allow transactions flow seamlessly across all mobile money providers.

Countries like Tanzania, Kenya and Madagascar are on the road to full interoperability, with providers such as Airtel Money, mVola and Orange Money in Madagascar all permitting transactions across one another’s platforms – a significant move in a country where there are more mobile money accounts than bank accounts. Other countries throughout the continent are likely to follow suit.

Banking and beyond

Today, mobile banking apps are a de facto part of the customer-bank relationship – but they could be just the beginning for Africa. In more developed markets, brands like Apple, Samsung, Android, Walmart and many more all offer their own mobile wallets that let customers just wave their smartphones across a terminal, make a payment and be on their way. In time, these type of contactless mobile payments and more may also gain a foothold in Africa.

IDC forecasts that global mobile payments will account for $1 trillion in value in 2017, an increase of 124 percent from less than $500 billion in 2015. And with several hundred million African citizens now gaining access to previously unavailable mobile payment and banking solutions, people in Africa are set to join the rest of the world in reaping the benefits of more convenient banking and greater control of their finances. Recent research has shown that over 80 percent of adults throughout Africa prefer to pay with their mobile devices rather than with a bank card. The momentum behind mobile banking and mobile payments in Africa makes it an industry that is only set to continue growing.

To read more about how Orange is working with Vivo Energy, the Shell licensee in Africa, help Shell customers pay for their fuel on their own terms using Orange Money, please click here.