Mobile Money Technology – Development Opportunities

Since the use of money as a means of facilitating trade and financial transactions, man has constantly sought new techniques to make these operations simpler and faster, without sacrificing the security of money circulation.

Electronic means of payment such as bank cards and transfers have long made these exchanges possible and with the advent of mobile telephony a new means of payment has since emerged, namely mobile payment.

According to Wikipedia, mobile payments (also known as mobile money, mobile money transfer and mobile wallet) are all transactions made from a mobile phone and debited from a bank card or from the operator’s bill or from an electronic wallet and can be delivered with a cash deposit from an agent or merchant.

In this article, let’s take a look at mobile phone to mobile money transfers, also known as mobile-to-mobile transfers or mobile money transfers. This means of payment competes both with and in addition to the above devices (bank cards, cash and bank transfers, etc.)

Mobile money is a financial transaction service available to anyone with a mobile phone, including those without a bank account. It is a type of payment made with mobile phones that allows a consumer to purchase goods and services by paying for them through their phone instead of paying for them by credit card or cash.

It is based on mobile operator accounts and can be accessed from subscribers’ phones. It offers simple person-to-person transactions instead of complex banking transactions. All that is required is for the recipient to have access to a mobile phone.

Mobile money as a lever for socio-economic development

Mobile-to-mobile money transfer is particularly developed in emerging countries. This is to facilitate and distribute financial services where a large part of the population does not have a bank account, especially in South America, Sub-Saharan Africa and the rest of the world such as Asian countries.

It makes it possible to facilitate access to money transfers (sending, receiving, storing and spending money) simply by using the mobile phone. But also to offer traditional bank savings and loans to people without bank accounts, to democratize financial services or to overcome obstacles to social and economic development. The telephone number is then equated to an account number.

In addition to the historical players in the field of domestic and international money transfers, such as Western Union and MoneyGram, many telephone operators offer electronic money accounts that are linked to the mobile number. This allows access to a range of services including money transfer: money, paying bills and buying credit.

These include Asian (Alipay, WeChat, GCash), South American (DaviPlata, Tigo Money) and even North American (Google Pay, Apple Pay, Samsung Pay) operators.

What about Africa?

Africa is the world’s largest mobile money market and the COVID-19 pandemic has only accelerated its growth. According to Irish market research firm Research and Markets, the mobile money market in Africa reached a transaction value of $365.4 billion in 2020.

Many people living in Africa do not have access to traditional banking services. According to the Middle East Business News and Magazine site, which provides information on business dynamics and economic and socio-economic issues, nearly 57% of them did not have any form of bank account in 2018 and 40% of African banks’ customers preferred digital channels for transactions.

In addition to the usual money sending and withdrawing services, telecommunications operators are increasingly applying innovative practices that allow customers to pay their bills and access services such as loans and insurance.

Registered mobile money accounts in Africa reached 562 million in 2020 while monthly active accounts reached 161 million according to the GSMA report.

These are the main players offering mobile money services in the African continent:

1. MTN Mobile Money

With 46 million users worldwide, MTN is one of the best known and most widely used mobile wallets in Africa. It provides services in Rwanda, South Africa, the Republic of the Congo and more than 20 other countries in Africa and the Middle East.

2. Orange MoneyAfter the first launch by the Orange group in 2008, Orange Money quickly became one of the most popular mobile wallets in Africa. With about 45 million users, it is used only slightly less than MTN. It is also available in 18 countries on the continent and is one of MTN’s biggest competitors in many places.

3. M-Pesa

M-Pesa was launched in 2007 by Vodaphone for Safaricom and Vodacom and is used in DRC, Egypt, Ghana, Kenya, Lesotho, Mozambique and Tanzania.

4. Airtel

Subsidiary of the Indian group Airtel, it offers its services in 3 African countries: Burkina Fasso, Kenya and Malawi.

Numerous benefits for the socio-economic development of communities:

  • Mobile money promotes exchanges and breaks the isolation of rural areas including the low number of bank branches in some areas.
  • It allows households to save their money by keeping it in their mobile accounts instead of at home. This through which they can safely put money aside with limited transaction and manage it well and for a fee.
  • Mobile money also has strong social effects, including reducing the vulnerability of poor populations. It enables the financial and social inclusion of unbanked people in the region. Particularly rural people such as women and traders in the informal sector. It provides access to health care to the extent that the population has the necessary means for transportation and medical costs within reach. Not to mention that parents can also pay the school fees of their children who are returned for non-refund of tuition fees, a widespread phenomenon in Africa.
  • It allows women to gain autonomy because, with household finances often managed by men, women can now manage their own accounts separately. They can keep their money in a safe place and spend it directly on other activities such as purchasing, taking care of their families, developing their business and, most importantly, sending their children to school.
  • Mobile money is a source of additional tax revenue as transfers are tracked and recorded, making the money visible to countries’ tax authorities and enabling them to tax where tax is almost nonexistent. We can refer to the payment of salaries and social assistance by states, companies and NGOs, the transfer of money between individuals who have gone to work in metropolitan areas and their families who have remained in rural areas. For example, the GSMA estimates that in 2018, mobile money enabled the collection of $15.6 billion in taxes and $5.4 billion in taxes on businesses and employment in Sub-Saharan Africa ($2.8 billion in taxes and $1.6 billion in taxes on businesses and employment in West Africa).
  • The mobile money sector with the activities directly or indirectly related to it contributes to the creation of new jobs. In particular, agents responsible for depositing and withdrawing cash who are directly employed by the mobile ecosystem and are “formal” employees.
  • Mobile money is a way to reduce the share of the informal economy in developing countries. It certainly contributes to the development of an economy and visible players.

Today, millions of Africans use these mobile money transfer services. This sector has become so vital that the banks themselves are developing ‘mobile banking’ services in the hope of nibbling at this pie that is largely in the hands of mobile phone operators.