Out-Law News 2 min. read
18 Feb 2015, 4:07 pm
The report by the Boston Consulting Group (BCG) said the region is adopting mobile financial services “at a pace seen in few other places, presenting banks and mobile-network operators (MNOs) with a set of strategic choices that will go a long way toward determining their success in the region”.
“The use of mobile financial services in sub-Saharan Africa to do such things as pay utility bills and send money to relatives could produce an estimated $1.5bn in fees for mobile-money providers by 2019,” the report said.
“Sub-Saharan Africans are looking for more-secure ways to borrow and save money and are open to other financial products delivered using mobile phones, including loans and insurance.”
Infrastructure investment expert Akshai Fofaria of Pinsent Masons, the law firm behind Out-Law.com, said: “This study reiterates the importance of understanding the differences between African and Western banking. Any banks that don’t react quickly will be left in the dust, as potential partnerships with mobile providers will not be in everlasting supply.”
According to the report, while mobile financial services are emerging all over the world, sub-Saharan Africa’s “unique circumstances”, including a combination of a “mostly unbanked” population and heavy mobile-phone penetration, “have turned the region into an early adopter of mobile banking and a test bed for the technology’s potential”.
Eight of the ten countries that “make the most use of mobile financial services are in Africa”, and sub-Saharan Africa has the highest proportion of active accounts at 43%, the report said.
As the region’s population grows and becomes more affluent, “the number of people aged 15 or older with an individual annual income of $500 or more will rise to more than 460 million by 2019”, the report said. “This trend is likely to strengthen as governments in sub-Saharan Africa increasingly focus on their education, health, and security systems, enhancing the potential for long-term economic growth in their countries.”
BCG estimated that by 2019 there will also be some 400 million unique mobile phone subscribers and almost 150 million “traditionally-banked sub-Saharan Africans”. “That will leave some 250 million sub-Saharan Africans aged 15 or older who have incomes of $500 or more and mobile phones but no traditional bank account. This gives a sense of the potential market for mobile financial services.”
However, BCG said: “To succeed, banks and MNOs will need to invest in infrastructure, business capabilities, and governance. A critical piece of infrastructure is a network of agents. These are the physical places where sub-Saharan African consumers can sign up for a mobile financial service and make deposits and withdrawals, the equivalent of the terrestrial world’s bank branches.”
BCG partner and report co-author Hans Kuipers said: “Mobile financial services aren’t new, but they’re at an inflection point and adoption is accelerating. This is not something that African banks or MNOs can afford to ignore. A bank or MNO that isn’t active in the market runs the risk of becoming less and less relevant.”
Kuipers said: “Banks and MNOs are complementary in this space. Each has something the other needs. In many cases, it will make sense for them to team up.”
According to a survey published by Swedish technology company Ericsson in 2014, digital technology is "fast becoming a part of everyday life" in sub-Saharan Africa while total mobile subscriptions are rapidly catching up with those globally. The region's mobile data traffic is predicted to grow around 20 times between the end of 2013 and the end of 2019, by which time Ericsson has predicted that there will be around 930 million mobile subscriptions in the region.
