Mobile Payments in Africa: Contactless Technology in an Emerging Market
Contactless technology continues to take the world by storm. We’re finding ways to connect and communicate with each other through tech devices. We’re ordering groceries for delivery and doing this year’s Christmas shopping in-app. But perhaps the most startling growth is occurring within the mobile payment space in emerging markets like Africa.
Mobile Payments in Africa: A Brief History
The mobile wallet services millions use today can be traced back to innovation in Africa. Stakeholders in the Kenyan mobile network provider Safaricom realized that customers were using prepaid airtime (prepaid phone minutes) as cash back in 2007.
To take advantage of their customers’ mobile currency preferences, the company launched M-Pesa. The “m” stands for mobile; “pesa” is the Swahili word for money.
The idea caught on and spread across the continent. Safaricom moved on to add more features and capabilities such as P2P or peer-to-peer transfers.
As the mobile wallet spread throughout Africa, other parts of the globe began to see its benefits. Soon, India, Europe and China entered the market, developing leading financial services such as WeChat.
Africa Experiences Rapid Mobile Money Growth
Recent data shows the continuing rapid growth of mobile payments in Africa. At the beginning of 2020, nearly 200 million consumers in East Africa had subscribed to mobile money services. In addition, a whopping 80% of the population currently has a mobile device. It’s forecasted that by 2025, two-thirds will have a smartphone.
There were 17.1 billion mobile money transactions in Eastern Africa in 2019. And in sub-Saharan Africa, the value of mobile money transactions reached $456.3 billion USD.
FinTech Giants Help Move Africa’s Mobile Payment Industry Forward
Africa is home to hundreds of fintech companies and start-ups working to push the market forward. Recently, fintech giants Mastercard, Visa, Stripe and PayPal began partnering with local companies in Africa to help support critical financial services.
Mastercard has since backed Flutterwave, a website, mobile and POS payment software. Visa has moved forward to back Paga, a Nigerian P2P payment service known as the PayPal of Africa and Interswitch, an all-inclusive payment platform. Stripe has moved forward to acquire Nigerian-based Paystack, an online or offline payment service. And as for PayPal, they entered the African fintech market by backing Tala, an online lending platform operating in Kenya and Tanzania.
What’s driving all of this growth? Increased access to technology and decreased access to traditional financial services are only the beginning. A global pandemic is also at play.
Mobile Payments & COVID-19
COVID-19 entered the scene in Africa heavily in March 2020. To try to curb the spread, Kenya began to push mobile wallets and payments as an alternative to cash. And as cases in South Africa resulted in travel restrictions and the declaration of a national disaster, Africa’s fintech start-ups began to act.
For example, Safaricom waived its fees for M-Pesa to try and reduce physical currency use. In Nigeria, fintech company Paga made fee adjustments as well, even allowing merchants to accept payments for free.
As a result, we caught a glimpse of just how fast mobile payment technology could become the norm across Africa. In Rwanda alone, person-to-person transfers increased by 450% by the end of April. According to expert estimates, by 2025, Africa could see as many as 850 million mobile payment users, supporting around $2.5 trillion to $3 trillion in transaction volume.
What Does the Future Hold for Contactless Technology in Africa?
Around 66% of sub-Saharan Africans are listed as “unbanked.” Yet, mobile payment technology is rapidly improving financial inclusion across the globe, including throughout Africa. It’s not a hypothesis that the future is bright for fintech across the continent—it’s a fact.
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