Mobile money interoperability: when will the industry realise its potential?

Dare Okoudjou, CEO & Founder, MFS Africa 

At Mobile World Congress, the GSMA announced that there are now 500 million people with a mobile money account across 92 countries as part of its “State of the Industry Report” on mobile money. The GSMA also highlighted a number of positive trends including the impact that mobile money is having on economic growth and the ability for it to drive financial inclusion. 

While it is clear that mobile money is opening up access to financial services across emerging markets and has enormous potential, the industry needs to go further. Worryingly, only two out of ten people with a mobile phone uses mobile money. 

This means that 80% of mobile users are choosing to not use mobile money. If mobile is the panacea to financial inclusion in Africa as the industry says it is, why is this the case? 

Mobile money in Africa exploded ten years ago because it gave unbanked individuals access to financial services that were previously unattainable. The momentum of mobile money needs to continue, but this will only happen if the industry is honest about the biggest challenges and what is needed to overcome them. 

To drive financial inclusion through the ongoing adoption of mobile money both scale and utility need to be addressed and to do this we need to maintain or increase investment in operators’ agents network and most importantly, build interoperability by interconnecting mobile money schemes into a seamless continental Automated Clearing House. 

The importance of interoperability 

Today, credit cards can be used globally because of interoperability. Individuals can use their card anywhere in the world to pay merchants, enterprises and other people that may not belong to the same bank as them nor even be in the same country. The same card can be used to pay physically, or over the internet or via a mobile phone. Card holders have one way to make payments and that works the same way in all instances. If there were restrictions on who you can pay, where you can pay them and how you make that payment then credit cards simply wouldn’t be as ubiquitous as they are today. 

Fundamentally, for payment systems to mature, there needs to be the capability and technology so that consumers can pay anyone, anywhere, in exactly the same way, and scale to provide the reach that consumers, in an increasingly global world, need.  The two are tightly intertwined – for utility you need scale, and for scale you need utility. 
The lack of scale and utility is holding back mobile money in Africa. 36 markets in Sub-Saharan Africa feature two or more networks but users cannot send money to another person on another network in their country, nor to a person in another country. Consumers that send money across borders are currently charged 20% of their transaction, making payments of all sizes uneconomical. Moreover, merchants, local and international are forced to connect to each mobile money schemes and operate different settlement arrangements to achieve the coverage they need to accept mobile money payments.

Without interoperability, MNOs’ customers cannot send money to another consumer on another network in their country, nor to a person in another country. Large merchants will be reluctant to embrace mobile money because of the complexity of multiple implementation projects and ongoing operations of multiple connections. Financial institutions willing to develop products for the unbanked will also need multiple engagements and will sometimes be forced to develop different versions of the services for different mobile money schemes; in short, consumers can’t transact across borders and networks, mobile money providers and merchants can’t scale services and boost reach, and the broader economic benefit of continent wide payment system remains unfulfilled. Everyone loses out.   

Ecosystem transactions 

The 174 million mobile money accounts globally active aren’t all used for the same purposes. 

Ten years ago mobile wallets were used for domestic person-to-person payments or domestic airtime top-up. Today, in an increasingly global economy, person-to-person payments, bill payments, bulk payments, etc. need to be made across borders. The list of uses is reflective of a credit card as a mobile wallet – it should have the same capabilities and create an ecosystem of transactions. 

This ecosystem of transactions grew by more than four times between 2013 and 2016, but a high concentration of this growth was in South East Asia. To ensure that Sub-Saharan Africa grows its transaction ecosystem, it is critical for cross-border payments to be made accessible to mobile money users. Transactions are not subject to one area or country, meaning flexibility is vital for mobile money users to make the purchases on items they want – whether that is physical payments instore, online purchases, airtime top-up, money transfers, etc.

Developing this ecosystem will also boost financial inclusion. The bigger the network, the more accessible it becomes. If mobile money transactions become the norm for consumers, operators, banks and the large number of new fintech companies, this will mean that more relevant services will become more accessible to those that currently can’t access them.  

The ecommerce opportunity

PayPal has helped accelerate the growth of ecommerce by making it easy to pay online. PayPal, like any good payment system works because of its utility and scale – you use PayPal the same way, anywhere in the world. Most retailers in the world have a pay by PayPal option on their website. To fuel the digital economy in Africa a mobile equivalent is required because that is how most people access the internet. Consumers need a “Pay by Mobile Wallet” button. 

The opportunity of ecommerce is still in infancy and Sub-Saharan Africa currently represents a small ecommerce market, but a strong double-digit growth is expected in the coming years with revenue set to surpass US$100 billion in 2020. 

Interoperability will bring a whole host of benefits to the African mobile money market – it will help the wider ecosystem to reduce costs, deliver greater customer value through enhanced functionality, convenience and increase choice for the end consumer. But this can only be achieved if the African mobile payment network becomes bigger than the sum of its parts.