Payment Technologies in Africa:
Innovating towards financial inclusion
Convenience is often cited as the goal of new payment technologies, but at its heart, payment innovation is about financial inclusion. In a manner of speaking, mobile payment was invented not by banks but by people. Right around the time when mobile phones started hitting the mass market, Kenyans would swap pre-paid calling cards in exchange for goods and services. Today’s technology for using mobile phones to transfer money is somewhat more structured, but the core principle remains similar. For unbanked citizens of any country, mobile banking opens up a whole world of financial opportunity.
M-Pesa has been hailed as the world’s premier mobile payment system, having amassed over 15 million users since being launched in 2007 by Safaricom in Kenya. There’s no need to have a bank account: just pay in cash at a mobile shop, and get phone credits in return. Transfers are quicker and safer this way, a feature particularly valuable in countries where people often send money home to their families in rural areas. Compared to the standard method of handing an envelope to a trusted friend, or maybe just a bus driver, mobile transfer technology represents a significant leap.
Supported by Vodafone, M-Pesa has now expanded to nine other countries, where the benefits have expanded beyond the obvious to create also life-altering possibilities. For example, a non-governmental organisation in Tanzania has used M-Pesa to send money to patients facing prohibitive costs for travelling to its hospital. In Kenya, people put M-Pesa credits on a key fob to pay for clean water. There are numerous other mobile money providers across the African continent offering similar services, but as people grow more comfortable with alternative payment systems, providers have stepped up their game. Now, the mobile phone is at the centre of more sophisticated financial products, such as loans and savings products from M-Pesa, which can also be used to disperse salaries and pay bills.
In Kenya, banks had long been largely ignoring the microloan sector, but mobile operators have proved it can be not only transformative for local communities, but also profitable for the lender. The M-Shwari credit service was introduced by mobile network operator, Safaricom, three years ago, and now has over 10 million customers. Using M-Shwari means business owners can stop by a mobile shop to deposit cash, and upon doing that, he or she can access a loan worth double the deposited amount. This system enables small business owners to make investments into their companies, and accelerate their growth and earnings.
Globally, the World Bank estimates that only 2% of adults have a mobile money account, but in sub-Saharan Africa, this figure rises to 12%. Having access to a phone-based account may be the first step towards financial inclusion, however basic services are only the start of what is possible with a phone. Access Bank in Nigeria took another step towards a more sophisticated level of financial inclusion earlier this year when it introduced PayWithCapture.PayWithCapture is a mobile payment solution that permits customers to make payments by scanning a generated QR-Code using the camera of their mobile device or by simply walking into a store and their Beacon-NFC Pay automatically prompts you to pay. It can be linked with different cards (MasterCard/VISA, Bank Account & Mobile Wallet) and affords customers the opportunity of selecting which payment instrument he/she chooses to use.
“Forging growth in mobile payment solutions requires inclusiveness. For the potential of mobile payment technologies to truly explode, it’s important that we begin to see it as more than a bank initiative but more of a consumer initiative,” says Herbert Wigwe, Group Managing Director of Access Bank. Accelerating financial inclusion in Nigeria was among the motivating factors for building PayWithCapture, says Wigwe, who considers the current state of banking to be at the intersection of retail and mobile. The new payment system from Access Bank is a response to Nigeria’s particular circumstances, where people have several payment instruments and internet infrastructure remains nascent. PayWithCapture works offline as well, mitigating concerns that network downtime could prevent payments from taking place.
In many ways, banking technology across Africa is far more advanced than that of the rest of the world. Innovation driven by need is often cited as a reason for this, but a quick look at the number of unbanked people in other countries show there’s no shortage of need elsewhere. For example, 8% of US citizens are unbanked, according to the US Federal Deposit Insurance Corporation, and more than double this number are unable to access credit services. Ground-breaking thinking around payment may have led to rising financial inclusion across the African continent, but beyond that, it has also set the bar for global payment technology innovation.
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