In 2007, the inception of M-Pesa marked the beginning of the mobile money revolution, transforming financial landscapes across Africa. What exactly is mobile money? Mobile Money, a service facilitating money transfers through mobile networks, introduced a novel approach to financial transactions.
How does it work?
M-Pesa pioneered a system enabling users to transfer money directly from their devices without relying on traditional bank structures. Unlike services such as Zelle, which depend on banking structures for transactions, M-Pesa and other mobile money services operate through a cash-in and cash-out system. Users create an account with a mobile service provider and can deposit cash through authorized agents, revolutionizing the accessibility of financial services. Common mobile money features include cash-in and cash-out, peer-to-peer (P2P) money transfer, voice (airtime) and data top-up, merchant payment, bill payment, and international remittance.
What laid the foundations for the mobile money revolution?
Kenya's information technology revolution in the 2000s set the stage for the mobile money revolution. The late 1990s saw less than 3% of Kenyan households owning phones, skyrocketing to 93% by 2011. This infrastructure laid the foundation for Safaricom’s M-Pesa launch in 2007, introducing a revolutionary approach to financial transactions.
Why is mobile money transformative?
Mobile money is pivotal in providing access to users without traditional banking infrastructure. In cash-based economies like those in many African countries, citizens in rural areas lack access to banks. Financial exclusion contributes to poverty, with less than half of households in the region having bank accounts. A quantitative study exploring the correlation between mobile money availability and school participation reveals a positive connection. Increased mobile money availability correlates with higher school attendance. This suggests that providing mobile money could potentially enable one million children to attend school in low-income countries (Billari & Rotondi, 2022). At the core, mobile money provided access to the unbanked. The mobile money market thrives on three key factors: financial inclusion, accessibility, convenience, and cost savings for users. Mobile money, exemplified by M-Pesa, is often more cost-effective, secure, and faster than alternatives like traditional banking infrastructure or gold transactions.
Who are the key players?
Mobile money has witnessed widespread adoption across Africa, with notable providers such as M-Pesa, Airtel, and MTN Mobile leading the industry.
What are current market trends?
The pandemic significantly impacted the mobile money industry's growth, contributing to an additional 400 million registered accounts between 2019 and 2022—30% higher than the 2019 forecast. In 2022, sub-Saharan Africa continues to lead in the mobile money industry with 781 million active accounts, reflecting a 17% increase. Mobile money transaction volume in SSA is 44.9 billion, a 21% increase from the previous year, with a total transaction value of 836.5 billion, marking an impressive 22% increase.
These trends affirm the resilience and continual growth of mobile money, solidifying its role as a transformative force in Africa's financial landscape. Importantly, mobile money is an effective example of solutions that fit African needs and work with African infrastructure. This is crucial to consider as the continent formulates its strategy for implementing AI to meet its needs while accounting for infrastructural challenges.
References:
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