New innovations are changing Africa’s mobile money ecosystem for consumers and businesses alike. Electronic payments through mobile service providers, also called telcos, are increasingly displacing cash transactions in many countries on the continent. Africa is leading the innovations in mobile money, which is attracting new investments and regulatory shifts.
This is creating a change in the way mobile money wallets work and what they can offer. Mobile money is entering its second iteration, which necessitates a mobile wallet 2.0. This service will offer far more conveniences and capabilities than the existing wallets.
4C Group is a service provider in this landscape that offers a comprehensive suite of fintech solutions for telcos and financial service providers. Our innovative iNSight software is used throughout Africa as a payment gateway that connects millions of mobile money users to a range of merchants, businesses and products. This is a scalable digital architecture that can be deployed across multiple platforms in various markets.
Growth of mobile money in Africa
Africa is responsible for almost half of all mobile money activity in the world. Mobile money payments are expected to grow by 20% per year to become a $40-billion industry by 2025, according to McKinsey. Electronic payments are attracting more investment than any other financial services sector across the globe and this industry is growing rapidly. Mobile money in Africa generates more than $25 billion in revenue per year.
Globally, there are about 1.4 billion registered mobile money wallets that transact $1 trillion annually. However, the biggest growth has occurred in the period following the Covid-19 pandemic, with some African countries seeing their mobile money sectors doubling since 2020.
Kenya, Ghana, South Africa, Nigeria and Egypt have shifted to digital payment systems faster than other countries. Mobile money usage, e-commerce stores and local legislation have enabled this rapid development, where some African countries lack some of these key contributors. Uganda, Senegal and the Ivory Coast are expected to achieve growth in the near future.
While South Africa’s mobile money environment is small, other e-payment systems make it a massive player in the digital payments market. Cryptocurrencies, e-cash systems offered by banks and supermarkets, and banking apps allow citizens to transfer digital currency for goods and services.
What is mobile wallet 1.0?
The first iterations of mobile wallets are pretty simple. Mobile money can be sent, received and stored on a mobile network. These wallets are generally created by telcos and are compatible with all phones registered on their networks. They do not need an internet connection to be accessed, simply a signal from the nearest tower.
Mobile wallet 1.0 targets the widest range of users and allows for additional services, such as converting mobile money into airtime and data. In addition, users can exchange their mobile money for real currency if they link a bank account to their wallet or if they deposit and withdraw through a merchant. In essence, mobile wallet 1.0 is a simple interface that is powered by USSD codes and SIM toolkit technology that is present on every cell phone.
Enter mobile wallet 2.0
Now, we have seen an emergence of more complex apps launched by banks, financial institutions and private developers. Mobile wallet 2.0 is sometimes referred to as digibanks and almost exclusively work on smartphones. They are more refined and offer more specific features that allow for sophisticated financial transactions.
In 2021, half of all investments into technology startups in Africa were spent on fintech innovations. This has enabled businesses to converge technologies, which can make it difficult to differentiate between the different types of mobile financial services. As such, mobile wallet 2.0 encompasses mobile banking as well as mobile credits, loans and insurance.
Mobile wallet 2.0 will be more intuitive with a refined user interface. It will allow users to liquidate their mobile money or exchange it for other forms of digital currency, such as cryptocurrency. These wallets offer more than just peer-to-peer, customer-to-merchant or consumer-to-bank transactions.
Mobile wallet 1.0 will soon be outdated
While it works for users that have older cell phones, mobile wallet 1.0 will soon be obsolete as more users buy smartphones. USSD is a ubiquitous interface that can operate on any mobile device registered on a mobile network, but its text-based interface is not ideal.
More and more users are opting to install proper apps on their phones as it’s more convenient and intuitive than USSD codes. How many times have you forgotten the exact code to buy mobile data or the code to check your account balance? USSD is slow and the usability is fast becoming more of a burden than a joy.
A graphical interface with intuitive steps is the best solution. Apps that are well-designed and offer more services to users are the future. Mobile wallet 2.0 enables more financial freedom, even for users in remote parts of Africa where cell phone reception may be limited. As major telcos improve their coverage, these wallets will be more popular, especially among first-time users and the younger generations.
At 4C Group of Companies, we strive to effect operational changes and cost savings for customers through our iNSight product and associated services. This product’s main function is to re-purpose and deliver business-critical information to a variety of systems and stakeholders.
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