Mobile phones and rising connectivity in Africa will give rise to a new market in mobile financial services, creating explosive opportunities for business on the continent, research has found.
The Boston Consulting Group (BCG) estimated that in three years, 250 million Africans without access to traditional banking services “will have mobile phones and a monthly income of at least $500”.
That could translate to projected revenues of $1.5 billion (1.3 billion euros) from mobile financial services, the group said in a report released Tuesday.
That’s key for a continent where the banking system is as yet hugely underdeveloped, but where strides have already been made in mobile banking.
In Kenya, for example, the mobile money system has nearly 18 million users thanks to the M-Pesa service run by British telecom giant Vodafone’s subsidiary Safaricom.
In Ethiopia, Africa’s second most populous country and one of its fastest growing economies, mobile phones are now being used to push an electronic payment service by phone called M-Birr.
This is all good news for Africa, where a mere 25 percent of Africans have a regular bank account because “financial service providers haven’t made the continent a priority,” the group’s report said.
The “high cost to serve and low margins of traditional bank accounts in Africa” are the main reasons for the oversight.
However, sub-Saharan Africa leads the world in mobile money accounts, according to the World Bank.
“While just 2 per cent of adults worldwide have a mobile money account, 12 per cent in Sub-Saharan Africa have one,” the Bank said in a separate study based on 2015 data.
That number is projected to grow now that more than 50 per cent of Africans over the age of 15 own a mobile phone and since mobiles are a low-cost way to reach a huge market.
“For most of these consumers,” said the BCG report, “mobile banking will be their first experience with financial services.”
Most Africans currently use mobile phones to transfer money but also to prepay utilities and purchase small items, as well as make debit-card transactions, BCG said.
‘African middle class’
The survey of 11 countries in sub-Saharan Africa found that four in 10 Africans access the Internet using a smart phone, while three-quarters use a computer to get on the web.
Since 2013, the number of Africans with access to the internet has grown by 8 per cent.
In Ivory Coast, access to the Internet has gone from 200,000 in 2008 to 8 million in 2016 thanks to 3G.
This connectivity, coupled with rising consumer classes and Africans’ increasingly optimistic outlook, will translate to over 1.1 billion consumers by 2020, the group said -- “more than the populations of Europe and North America combined”.
“The concept of a middle class is taken from the Western society model and has led to confusions when we talk of Africa,” said Lisa Ivers, director of the BCG bureau in Casablanca.