Kenya, Ghana set global pace in adoption of mobile payment

A new research reveals that Kenya and Ghana have the second and third highest mobile payment usage in the world after China, highlighting Africa's potential in modern finance.

The report, Five Strategies for Mobile-Payment Banking in Africa, by American research firm Boston Consulting Group (BCG) estimates that the total value of global mobile financial services transactions in 2020 is between Sh1.6 quadrillion and Sh2.1 quadrillion yearly.

Though constrained by a lower smartphone penetration rate compared to the world's most populous nation, the two African countries are playing a substantial role in underscoring the relevance of mobile money payments as the world moves to cashless systems.

In Kenya, according to the study, transactions via mobile wallets and phones represent 87 percent of the country's Gross Domestic Product (GDP), while in Ghana they account for 82 percent of GDP.

Although figures for mobile transactions are strong in Africa overall, they are not consistent across the continent.

"Kenya and Ghana, with their relatively mature mobile payments sectors, account for much of the business in Africa. In most other countries in the region, less than 50 percent of financial transactions occur through mobile payments," the report states.

Already, 400 million consumers in sub-Saharan Africa use mobile payment banking systems to handle Sh32.5 trillion worth of mobile money transactions, generating Sh21.6 trillion in mobile banking fee charges to customers.

The survey projects that by 2025, the mobile payment market in the continent could reach 650 million to 750 million customers.

"If that were to happen, mobile payments revenue, which tends to average about 1.1 percent of overall transaction volume, would rise from Sh379 billion today to between Sh1.5 trillion and Sh2.2 trillion," notes the report.

The ultimate size of the market across Africa could rise to as high as 850 million customers, supporting about Sh270 trillion to Sh325 trillion in transaction volume and Sh2.7 trillion to Sh3.2 trillion in yearly revenue from the financial transactions alone.

The survey acknowledges that Africa was the birthplace of the concept of a mobile wallet when Kenya's telco Safaricom launched the M-Pesa in 2007, and that has inspired the worldwide uptake of the idea with the global momentum in the mobile payments space moving to China and other geographies.

Chinese services like Alipay and WeChat have developed their mobile wallets into digital ecosystems with billion-dollar valuations.

"China has the highest utilization rate of mobile money, with 125 percent of its GDP transacted via mobile ­payments each year," report notes.

BCG says the figure is higher than 100 percent because it includes person-to-person transfers, such as money transfers among friends and within families, which are not included in GDP. However, it notes that such type of mobile payment innovation could find fertile ground when it returns to Africa.

This tracks with ambitions of African telco giants such as MTN and Vodacom to launch similar solutions for financial services.

"As African economies evolve, the mobile device will become the payment vehicle of first resort," the report says.

BCG is confident that mobile payments and other phone-based transactions represent “a must-win opportunity” for banks in Africa to not only remain competitive but also unlock new business opportunities across sectors such as energy, healthcare, education and transportation.

"The estimated market in facilitating payments alone is Sh54 trillion. By using digital platforms it offers the potential to develop more holistic solutions that solve deep-rooted customer friction points for African consumers," said Tijsbert Creemers, managing director and partner at BCG. Such mobile ecosystem solutions have been extremely successful in China and South East Asia, and BCG believes Africa is the next foreground for exponential growth.

"The other key factor is customer awareness: Africans are increasingly likely to have mobile phones and are eager for services that contribute to a higher quality of life," Mr Creemers added.

As Harvard Business School Professor Clayton Christensen documents in The Innovator's Dilemma, establishing a new adjacent market makes it much easier to disrupt and overtake more-established markets.

"To be sure, most African banks do not have much direct experience with mobile payments. But two dynamics make it is feasible for them to take the lead.


"On the supply side, we've seen the emergence of technologically enabled business ­ecosystems — groups of enterprises linked through digitally based platforms that make it easier for them to collaborate dynamically with other enterprises and remove much of the friction involved in joint ventures and other cross-boundary collaboration," says Frédéric Boutet, managing director at BCG.

The report adds that on the demand side, customers in Africa are increasingly likely to have mobile phones and are eager for better access to essential services, particularly those involving comprehensive solutions that make life easier. With the right support, the mobile wallet model stands many opportunities to attain even more success in Africa.

In Ghana, for instance, it has achieved strong market penetration and monetisation of consumer-­to-consumer transactions. In Côte d'Ivoire, the model has captured a high percentage of the market for consumer and business transactions.

"It is a leading vehicle for cross-border remittances between Côte d'Ivoire, Mali, and Senegal. Other applications lie outside financial services: online retail, ride sharing, health care services, energy services, and real estate," the report reveals. The survey illustrates that the best strategy to target the large majority of customers who are unbanked or underbanked, is by attracting them with use cases involving innovative offerings.

"The offerings need not be exclusively financial; they may also extend to health care, ­energy, or transportation as a service."

It notes that while most Africans consider access to banking, energy, health care, high-quality education, communications, transportation, and insurance to be luxuries, they would nevertheless appreciate ­having them.

"Banks should consider giving people holistic opportunities to access a ­variety of resources and solutions. For example, small-farmer sites could provide ­information on soil conditions and pests that would help farmers become more ­productive than in the past," says Takeshi Oikawa, BCG's Kenya partner.

For a continent whose rural population still grapples with the challenge of access to power, linking finance and electricity could be a valuable move. "This can be a good catalyst for developing a use case and a bank's capabilities together. Lighting represents 15 percent of a typical African household's income."


Kerosene, the most widely used source of electricity in Africa, is unreliable, a fire hazard, an indoor pollutant, and terrible for climate change. But solar home systems represent a safer, more convenient, and more appealing alternative, but the upfront costs of about Sh21,000 are too high for a low-income household to afford.

By providing a comprehensive solution—including a solar panel, financing, a process for repayment, a way to manage and monitor risk, and ancillary services, made easy through an ecosystem-driven mobile payments offering— BCG says a bank can generate a loyal customer relationship. Though that is already happening in countries such as Kenya, Nigeria and South Africa, banks in other nations have found it relatively difficult to implement energy solutions through partnerships with rural power solution providers. To win in this realm, the report advises banks to cultivate new thinking about customers and a new set of capabilities.

"Otherwise, technology and telecom companies could outpace them. In China, for example, tech companies dominate 90 percent of the market and have commoditized financial services firms into a role as back-end product providers," it exemplifies.

In Africa, telecom companies currently have a much higher market share in mobile payments than banks, because they have overcome some regulatory hurdles.

While banks typically focus on affluent customers, who represent perhaps 10 percent of the adult African population, telcos target anyone owning a simcard. Telcos offer lower fees and requirements, thereby attracting a wider range of customers.

"Telcos also have broader agent networks. In Kenya, there are over 700 mobile money agents per 100,000 people, compared to nine ATMs and five bank branches per 100,000 people. Telcos also have some unique capabilities - they manage the mobile network infrastructure," the study illustrates.