Mobile wallets key to an inclusive financial future

by Oct 19, 2023Uncategorized

The African fintech sector is one of the fastest growing in the world, attracting telcos and multinational corporations to join the race for a slice of the multi-billion dollar pie. According to McKinsey projections, the mobile payments market in Africa will generate around $40 billion (~R755 billion) in revenue per year by 2025.

For many Africans, mobile money is the foundation of financial inclusion and is revolutionising the way we transact with individuals and businesses alike. Many citizens live and work outside of their home countries, but they still need to send money home to their families every month. Mobile wallets and fintech services have become the go-to solution for many reasons.

They have lower transaction fees and costs than traditional banking systems, but they also offer convenience and reliability. Mobile apps allow people to send and receive money through their own smartphones. However, many fintechs offer physical stores where people can drop off cash and their loved ones can redeem the money in another country.

2D graphic of two smartphones transacting money with two small people standing next to the respective phones.

Why mobile wallets are important in Africa

According to Andy Jury, the Group CEO of Mukuru – a Zimbabwean fintech business that has amassed a customer base of around 13 million users – the need to overcome cash-based transactions in South Africa’s township economies has been around for a while. Cash presents safety concerns, so mobile wallets offer peace of mind to the people who use them.

“Addressing safety concerns of travelling with money and eliminating the inconvenience associated with finding somewhere to withdraw or obtain cash saves time and provides consumers with peace of mind,” explains Jury. 

“Digital wallets also level the economic playing field by removing the need for a physical bank to access financial services and by placing the power of commerce directly into people’s hands, increasing the ability to bank the unbanked,” he adds.

Mobile wallets are easy to use, improve safety and are the foundation of financial freedom for many Africans. Banks have been unable to reach certain sectors of the population, especially those living and working in remote areas, but mobile money is available to anyone with a phone and data.

These mobile wallets allow users to transact, manage their own funds, track their spending and even secure microloans. This means that users do not need physical bank accounts to be included in the financial system. They do not need to stand in queues or speak to tellers to access financial services.

Africa's evolving mobile money services need better security

Barriers to mobile wallet adoption

Like any digital solution, there are benefits and drawbacks. Mobile wallets have their own challenges to overcome, particularly in the informal sector where cash transactions are entrenched. African countries with established financial sectors and local currencies see a lower uptake of mobile wallets, but countries with unreliable currencies and few banks have a much larger adoption of mobile payment services.

“South Africa lags behind many other African countries in adopting digital wallets because of the relevant presence of a well-established financial sector, as well as the challenges around the regulatory environment, which creates barriers for non-bank participants. Bridging this gap requires robust infrastructure and an easy-to-use digital wallet that can compete with the convenience of cash, along with a supporting regulatory framework,” states Jury.

In addition, telcos must simplify their digital wallet registration processes. In South Africa, registering for a SIM card is complicated enough with FICA requirements, but signing up for a mobile wallet is more complex. This is currently hampering the adoption of mobile money locally, where some of our neighbouring countries have seen widespread success as their registration regulations make it easy for users.

Vector illustration of a man and woman standing next to giant smartphones with gold coins transferring between the two.

Mobile wallets encourage a cashless financial system

In countries where crime and safety are major concerns, a cashless economy makes sense in many situations. Mobile wallets allow for virtual payments and savings, which is appealing to many citizens. There are also numerous companies that accept mobile payments as legitimate transactions, meaning that the need for cash is reduced further.

“It is not about replacing one form of payment with another. Instead, it comes down to creating a transformative system that allows money to flow far more efficiently and safely between all the actors of the economy than using physical means,” says Jury. Telcos and fintechs need to ensure that their services are appealing and useful to citizens, otherwise, they will revert to withdrawing their money in cash.

This means that telcos and fintechs must encourage users to send mobile money to their families and friends. In addition, they need to convince local businesses to accept mobile money payments from users. As the use of mobile wallets grows, more and more citizens and companies will follow suit.

In some countries, people can pay for basic services and utilities with mobile money. Airtime, electricity, rates and goods can be bought through mobile devices and without the need for physical cash. The use cases are compelling, especially in the informal sector.

Mobile wallets are key to financial inclusion in Africa, but they require all stakeholders to support a digital revolution and embrace a new financial ecosystem. Many nations have already been successful; statistics show that digital payments are growing rapidly in Africa. But digital wallets need to be user-friendly and trusted in order to create real value for users.

4C Group offers several fintech services that are built around our innovative iNSight software. 4C Group helps to provide secure, transparent, affordable and easy-to-use fintech solutions that cater to the needs of African fintech companies by developing custom software applications for financial service providers and fintech firms. If you’d like to find out more about these offerings, please contact us today.

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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. 

We specialise in information management, business assurance, fintech solutions and a variety of cyber security services. For more insights into our products and services, check out our blog page or follow us on Facebook, LinkedIn and Twitter.

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