The rise of mobile money in West Africa: from late stage to market leader

by MMC
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Since the rapid rise of MPesa in Kenya opened a new market for consumer and business payments, East Africa has become Africa’s mobile money hotspot. Similar results were obtained in Tanzania, Rwanda and Uganda. Ethiopia is also in the early stages of its mobile money revolution. However, some of the continent’s most promising mobile money markets are in West Africa, a region that came late to the revolution but is now defining it.

No more latecomers

Kenya may be the poster child for mobile money, and the payment method remains a big and important part of how Kenyans, residents and visitors conduct their daily transactions – but Kenya is not no longer the only example of how mobile money can transform economies.

Between 2020 and 2021, the number of mobile money transactions in Ghana increased by 48.6%, from 2.85 billion transactions in 2020 to 4.26 billion transactions in 2021. In contrast, the volume of transactions of mobile money made in Kenya in 2022 increased slightly by around 5% to 2.8 billion from 2021.

Ghana’s annual gross domestic product is currently equivalent to almost 70% of Kenya’s economic output, which partly explains why this figure is significant. Nonetheless, 82% of Ghana’s economic output in 2021 came from mobile money transactions in the country. This compares well with data for Kenya which was reported at only 68% by Global Voice Group, a Spanish data technology and compliance company, or 87% by the Boston Consulting Group. The World Bank says Ghana has the fastest growing mobile money market in the world, which is important. Due to new government tax rules that could monitor mobile money wallets for tax purposes, Kenya could see a decline in mobile money transactions.

The fact is that although MPesa, Kenya’s leading mobile money operator, remains at the top of Africa’s mobile payment ecosystem in terms of transaction value, this lead is slipping away. Small West African countries are already the next frontier of growth.

How West Africa is becoming a mobile money hub

Mobile money ecosystems are growing to become trusted and important players in the financial services sector, not only in Ghana but also in other West African countries. The GSM Association’s 2023 State of the Mobile Money Industry Report indicates that while growth in East Africa was only 12% and 8%, respectively, East Africa West saw a 27% and 30% increase in registered accounts and active mobile money accounts at 30 days. .

In absolute numbers, East Africa remains ahead in terms of transaction value and volume, but this lead has been declining for two consecutive years, reports the GSMA. On the other hand, the number of active accounts in West Africa grows each year faster than the number of registered accounts.

What is driving growth in this booming new market?

Mobile money is growing in West Africa due to a number of factors, including:

  • Regulatory reforms that have opened up the mobile money market to previously closed players like telecom operators and fintechs.
  • The growing adoption of mobile money and the resulting convenience of payment method creates a flywheel effect that recruits more active users.
  • Increased government support for digital payments to better support revenue and economic formalization programs.
  • Within the region, mobile money adoption is also growing rapidly across the 8 countries that make up the West African Economic and Monetary Union (UEMOA, also known by its French acronym UEMOA), as fintechs take advantage economic integration between countries. For example, the Senegalese Wave became the first non-bank and non-telecom operator, operating in several WAEMU markets, to be granted an electronic money license (EME) by the regional central bank of WAEMU countries, the BCEAO.

From one perspective, the most interesting aspect of the growth of mobile money in West Africa is the gap that remains to be bridged, even as West African citizens and residents begin to trust the digital finance players as the main method of transaction.

Even as internet and mobile phone adoption rates continue to increase rapidly, financial inclusion rates remain low. In order to tap into the region’s largest potential market, P2P mobile payments, telcos, fintechs and banks from the region’s largest countries, such as Nigeria, are beginning to ramp up their efforts in this regard. In other words, the demand for mobile digital payment methods will continue to grow for some time to come.

This article was written by Moses Sule, Head of Growth (Africa), dLocal.

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