Mobile payments on the African continent started in Kenya with Safaricom’s much celebrated M-Pesa service. With 43% of Kenya's GDP now flowing through the service, it has had a revolutionary impact on financial inclusion across Africa.
Mobile payments work with the telco allowing customers to send, store, and receive payments with their mobile. Customers cash-in or cash-out at physical kiosks, or agents, and a bank will hold the funds in a deposit, but customers don't need a bank account. The model works well for two-thirds of sub-Saharan Africans who are unbanked, because no background checks or minimum deposits are required.
McKinsey estimates that the total mobile financial services market size in Africa is approaching $2.1 billion or approximately 2% of total African banking revenue pools.
The sheer number of mobile subscribers and agents is why telcos have been so successful, where banks, until now, have not. Thirty-seven African countries now have ten times more agents than bank branches. M-payments have only been in Ghana for a few years, but already there are 9.4 million subscribers and 120,000 active agents — not far behind Kenya where the market has been evolving since 2000, and there are 34 million subscribers and 165,000 agents.
The market is mature in Kenya and Ghana, but growing strongly in countries like South Africa with 57 million people, Cote d'Ivoire and Cameroon both 25 million. Nigeria's huge market, though, is being held back by Nigerians being required to have bank verification numbers in order to make mobile payments.
Banks and fintechs are also catching up with the telcos to provide mobile financial services. Kenya Bankers Association, which represents 46 banks, has now established a mobile payment platform, Pesalink, which will connect all banks in Kenya to allow person-to-person payments and directly challenge M-Pesa.
Paga, a Nigerian fintech, provides a digital wallet and has grown its customer base over 8% annually from 1 million in 2013 to 6 million in 2018 and processed $500 million in payments in 2016.
Telco mobile payment providers are also innovating however, with M-Pesa, for example, now providing loans and using subscriber transaction history as a credit check.