Information and communications technology (ICT) is revolutionising sub-Saharan francophone Africa, but nowhere is this more apparent than in the field of financial transactions. It has been estimated that over half of the world’s mobile money accounts are in sub-Saharan Africa, where mobile money is bringing financial empowerment to a largely unbanked population.
Originally used for interpersonal money transfers and repaying microcredits, mobile money is now being used increasingly to pay bills, receive wages, and pay for goods and services. Moreover, it is used not only by individuals but also by small businesses. Indeed, it has become a distinctive feature of the region’s economy, attracting considerable interest – and investment – from telecom operators, big tech companies and traditional banks alike.
Launched in Kenya by Safaricom in 2007, the mobile money concept was quickly embraced across the continent. Its uptake in francophone countries was largely spurred by the French operator Orange, whose mobile money service is available in Burkina Faso, Cameroon, Central African Republic, Democratic Republic of the Congo, Guinea, Ivory Coast, Madagascar, Mali, Mauritius, Niger and Senegal. Mobile money’s success in the region can be attributed to a number of factors: the exponential growth in mobile phone usage; the existence of a network of agents on the ground who act as intermediaries between providers and customers; and the fact that it relied on technology (USSD) that was inexpensive and compatible with most mobile phones used in the region.
At the outset, mobile money providers operated independently of each other, making it almost impossible to transfer money between competing systems. However, operators have realised that the interoperability of their systems can only be to their advantage. Partnerships have been struck up to encourage and facilitate interconnection agreements, allowing movements of money between different providers. There have also been multilateral initiatives to encourage further innovation and development in the sector, such as the recently created Africa Fintech Network.
Although mobile money has come a long way since 2007, its development continues, driven by the search for solutions that address the regions needs and by competition between stakeholders.
Mobile money providers are developing their services to gain a competitive edge. Orange Money, for example, is seeking to enhance the use of Mobile Money for the payment of bills by linking with utility companies. It is also expanding its ATM network so that customers are less dependent on agents when they wish to withdraw money. MTN, on the other hand, is focusing on improving the quality of the service provided by local agents.
Technological advances continue to come thick and fast. Open application programming interfaces (APIs) have been embraced to allow transparent interaction between suppliers of financial services and e-commerce platforms. Mastercard is promoting the use of QR codes for mobile payments in Africa. This solution, which allows customers to pay simply by scanning the merchant’s QR code, is less expensive than using payment terminals and is considered well suited to the market in sub-Saharan Africa. Technological innovation is also leading to changes in microfinance with, for instance, the use of digital field applications (DFAs) bringing the promise of greater efficiency, service quality and security in the processing of loans.
Traditional banks, not wishing to be left behind in a region where their market penetration is already less than elsewhere, are also extending their offer to mobile money. In 2017, Société Générale launched its mobile money solution “YUP” in Ivory Coast and Senegal, with plans to extend it rapidly to other francophone countries in the region. In 2018, Standard Chartered introduced its first digital-only retail bank in Ivory Coast, quickly followed in January 2019 by Banque Atlantique’s mobile application, “Atlantique Mobile”, also in Ivory Coast. Atlantique Mobile’s functions include an innovative money transfer service, biometric authorisation and facial recognition. It is to be deployed in other countries of the West African Economic and Monetary Union (WAEMU) during 2019.
The wave of inventiveness unleashed by the mobile money concept has also led to some highly original initiatives aimed at improving local well-being. For instance, the startup AfriMarket allows Africans’ shopping bills to be paid for from outside Africa. Along similar lines, a platform called Bouquet Pass Santé has been developed in Senegal to facilitate health information portability and the payment of medical expenses. In the Democratic Republic of the Congo, the UN Refugee Agency has piloted a scheme to assist refugees which is based on mobile money. Refugee households were given a mobile phone, a SIM card, a mobile money account and the necessary training, so that cash could be transferred to them, enabling them to construct shelters, pay school fees and start income-generating activities.
Such applications illustrate the dynamism of this youthful sector. However, it is important not to forget that mobile money also brings risks relating to such matters as security, IT outages, the need to insure funds held by customers and agents against loss, and the macroeconomic impact of an ever-increasing number of mobile money transactions. The latter risk has worried banking authorities. For instance, the Bank of Central African States (BEAC) warned of irregularities in international money transfers, fearing a fall in foreign-exchange reserves and ultimately the risk of a devaluation in the franc. As a consequence, it has made such activities subject to stricter regulations. Harbouring similar concerns, the WAEMU has placed restrictions on international money transfers, which prevent non-financial entities, such as telecoms operators, from offering money transfers outside WAEMU countries.
Clearly, mobile money offers enormous scope for human creativity and a wealth of opportunities for a wide range of economic players. Offering a combination of legal expertise and in-depth knowledge of local economies, John W Ffooks & Co aims to ensure that its clients can take full advantage of those opportunities.
John Ffooks, Senior Partner of John W Ffooks & Co, will be attending the Africa Financial Services Investment Conference (AFSIC) in London 8-10 May – anyone interested in meeting him should please email Contact@JWFLegal.com to arrange a convenient time.
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