Fintech for all? The rise of mobile payment technology in Africa

One could be forgiven for assuming the Silicon Valleys,Alleys or Gorges of the world are where mobile payments reign supreme. Thesetechnological hubs have long embraced disruptive start-up culture and many VCshave been ‘made’ investing in these organisations.

However, if you cast your eye away from the west, down tosub-Saharan Africa, you may be surprised to find that there is a quietfinancial revolution taking place. Where mobile payments are allowing access tofinancial services for those who traditionally would be denied, without theasterisks of travelling to the nearest metropolis.

As is a common theme throughout history, necessity drivesinnovation. In the most extreme example, during WW2 we saw the desperatesituations of war drive human ingenuity to develop marvels such as penicillin,pressurised air cabins and radio navigation. Now in Kenya mobile payments areserving as the relief for complex problems surrounding access to financialservices.

Labelling the issue with the term ‘access’ is admittedly anoversimplification, brushing over topics like living in extremely rural areas,satisfying the bureaucratic requirements of banks and lobbying from financialinstitutions to maintain market dominance. As much as I’d like to do a deepdive into these issues, they’re regrettably beyond the scope of this blog post.

InKenya, 73% of the total population (93% of the adult population) have amobile payment account. This translates to over 40 million people, all withaccess to financial services who make 17 million transactions a day.

These services have evolved almost hand in hand with mobilephone technology. Originating as a text in service in 2007, the service hasbeen developed into a fully functioning alternative to traditional banking,where users are able to do everything from transferring money to requestingloans and paying bills.

This successful implementation of mobile technology isunfortunately not mirrored in every African nation. An easy counterpoint tothis is found in Nigeria, arguably Africa’s largest economy. Where despite deeppenetration of mobile technology, 60% of Nigerians still do nothave a bank account and only 6% of the population use mobile phones to maketransactions.

This unfortunate situation is a result of lobbying fromNigeria’s largest banks who have managed to secure their position in thenation’s economy and exert their authority as market leaders. This impact isfelt both legislatively and culturally, where until 2017 any transaction above$10 was required to be accompanied by a paper document. There is also suspicionamongst the population who fear that if their device was stolen, they wouldlose access to their accounts so prefer to handle any transactions in person.Reaffirming the populace’s confidence in the cash economy.

A silver lining to this is that as we have seen from the2017 decision, restrictions are opening up and banks in Nigeria are beginningto work with mobile operators as opposed to against them. This, along withexperiments in HAPS (high altitude platform stations), such as Facebook’sAquila and NASA’s Pathfinder, are leading the push to open up access toreliable networks.

With wider reaching, more reliable networks it may bepossible for other technologies to help bridge the gap. A perfect example ofthis would be the Contactless Companion Platform (CCP) developedcollaboratively between Samsung, Smartlink and Ingenico. The technology isbased on NFC-enabled chips, which can be easily embedded into any number ofwearable items allowing payment to be made from digital ‘accounts’. Users canthen manage these accounts by either using a smartphone or by visiting a kiosk toload cash onto the chip.

This may help to controvert the fear that losing the devicewould be tantamount to losing money as there can be pre-conditions set to theuploads. These can be restrictions on where purchases can be made, how long themoney sits on the chip before reverting back to the original account, and inthe case of loss or theft the chip can be frozen and its contents loaded to aseparate chip or reverted back to a traditional bank account.

These conditions make the whole purchasing process moresecure and would help to expand services even further. Giving those who may havebeen turned away by traditional banking the opportunity to access the financialservices we all take for granted.