Win-Win Solution for Mobile Financial Services in Africa

 

Mobile financial services are already playing a fundamental and profound transformational role in Africa by extending the privileges associated with a financial identity and improving economic inclusion, contributing to a sustainable increase in national GDP.

The GSMA predicts mobile financial services will also create the opportunity for 1.7 billion unbanked in developing countries with mobile phones to secure a financial identity by 2012. The recent economic downturn has cast a shadow over this positive growth as the majority of vertical sectors globally, including mobile financial services, have been adversely affected in the last twenty-four months.

However, African banks had limited exposure to toxic investments and survived the crisis with little impact on neither their balance sheet nor their image/brand. We would expect over the next two years, regulators in the ecosystem to provide incentives for banks to offer banking services to lower income segments.

Other industries, including mobile and retail, will begin to offer new types of services that will evolve mobile banking significantly in Africa. Many examples are already emerging, ranging from cash-in and cash-out functionality for mobile wallets being available at retail outlets, to new cash-collection mechanisms for retailers, to payment services that serve small businesses.

We are already seeing interesting and innovative risk products specifically designed for small businesses (for example, farmers) that can only be delivered by mobile, for instance. As this market grows and matures, we will expect the services to go beyond transferring money to relatives, to more transformational services, such as bill payments and loans.

With these new mobile services, we will also see a reduction in technology capex for operators as more flexible and secure solutions become available for less. Further benefits for African banks include reduction in overhead costs, such as building maintenance and staff.

Many are of the opinion that operators and banks will go head-to-head for large customer bases within the mobile financial services’ market. I believe, however, that operators and banks can create a relationship based on mutual understanding where, put most simply, banks deliver the banking credibility and mobile operators deliver mobility.

This will in turn deliver win-win business models and drive growth within the market. For example, ten banks could collaborate with one operator for a single mobile financial solution on one platform, boosting economies of scale and market share for a minimal investment.

Relationships between banks and operators are already evolving in this direction of win-win business models, with the shared platform in Pakistan being a case in point. In the coming months, growing mobile infrastructure and win-win business models will continue to spur mobile financial services’ growth in Africa by creating opportunities for acquisition of smaller, specialised vendors and driving the rollout of new and more advanced mobile financial services.