Mobile money has been a huge transformative technology in Africa, particularly in East Africa, where it started ten years ago with the M-PESA project. In 2017, the take up of mobile money increased faster than anywhere else in the world, and over 40% of the population actively use this service, according to a report released by the global trade body GSMA. An international survey conducted by the World Bank and partners found that, of the 20 countries using mobile money the most in the world, 15 are in Africa. A massive 80% of all mobile money transactions worldwide happen in East Africa, mostly in Kenya.
M-PESA stands for mobile and pesa, the Swahili word for money. The vast majority of transactions involve peer-to-peer money transfers, but an increasing number of customers are using mobile money to pay bills. For businesses, this is a far more efficient way to collect the money owed to them. In 2017, the water and sewerage company Dar es Salaam Corporation found that revenue collections increased by 38% when it switched to mobile money.
Today, M-PESA is a mobile phone based money transfer, financing and micro financing service. It handles more than 900 transactions every second and has over 25 million customers. The wide reach of the mobile phone, particularly in Africa’s rural areas, has opened up access to banking and loan services to millions of people who had previously had to travel days to make a transaction.
A large portion of the population in Africa do not have a bank account, but nearly everyone there has access to a basic mobile phone. A customer registers with an M-PESA agent or local representative and gives them the cash they want to transfer. This is put on their phone as credit. They can then enter the phone number of the person they want to pay and the amount, and send it as a text. The recipient converts it to cash via their M-PESA agent or store. As well as money transfers, the main use of mobile money is to pay bills, such as school fees, power bills and mobile airtime. It is possible for businesses, using third party platforms, to accept money at the register using mobile phones, as well.
Mobile payments have become the number one solution for gaming companies too where micro payments are common and the added benefits of age verification and other risk services are automatically built in at part of the payment features. Brands such as SportPesa, Elitebet, Betin and Betway have been leading the way into parts of Africa’s gaming market.
One of the main reasons that mobile money has proven to be so immensely useful in Africa is that it bypasses the need for infrastructure. Mobile credit sellers can use the outlets that have always existed, such as petrol stations and stores. Solar and wind power mean mobile phones are used in even the most remote spots, where roads don’t reach. There is no need to have a system of ATMs and bank branches, so the lack of financial and technological infrastructure poses no barrier.