These are not smartphones; these phones have no bells, whistles, or apps. What they do offer their owners is access to goods and services without the need for cash, credit cards, or even a checking or savings account. Indeed, while numerous individuals in many African countries do have mobile phones, they do not have bank accounts.
As a win-win solution, mobile-payment platforms have answered the needs of mobile phone users, as well as those of the operator companies. Thanks to mobile payments, profits have launched into the stratosphere for mobile network operators. In Kenya alone, mobile money transactions totaled $22.4 billion in 2013, which comes to $2.6 million per hour. Sudan, Somalia, Tanzania, and South Africa are not far behind.
The frenzied growth has been less about the technology and more about meeting the needs of its users, who often are without hard currency. Many people living in rural areas do not have access to traditional financial services, as the nearest bank is a long way away.
Mobile payments: Benefits
The benefits of mobile payments for businesses are three-fold:
- New customers—lots of them: 50 to 60 million mobile money users mean more customers at more businesses; higher customer traffic means more sales.
- Low cost, less overhead: Merchants’ operational costs are minimal because they require no special devices to accept payments; transaction costs are lower than debit or credit card processing fees.
- Sell anything, anywhere: Once limited by sheer distance and limited transportation options, the point-of-sale can be as mobile as the money: online or in person, business-to-business, or face-to-face.
Mobile payments have become a major economic driver. They make it possible for even the poorest and most isolated citizens to engage in commercial activity. What began as a value-added service for users has become the means by which they participate in and grow their economy. Mobile payments are bringing new customers to more businesses than ever before simply because the system is easy, fast, and cheap.
Mobile payments: Challenges
Unfortunately, as with any new technological advancement, the prevalence and convenience of mobile payments is not without challenges.
Mobile network operators, locked in battles with banks and financial service institutions for customers and survival, are also battling each other to attract new users and build customer loyalty.
In fact, the unregulated, chaotic competition between mobile network operators and financial institutions for dominance in the mobile payments system is quickly becoming a threat to the very system and the strengths that caused the explosive growth in the first place. Regulation, fraud prevention, and standards are virtually non-existent. Interaction between the various and sundry mobile providers, merchants, and payment processors is poor, if it exists at all.
Governments are, however, beginning to develop regulatory frameworks to safeguard consumers and to manage and standardize accessibility. Likewise, reputable payment processors have been proactive in implementing their own regulatory practices such as PCI DSS certificates and SSL encryption along with other security and privacy technologies, in accordance with global best practices and regulations.
Ultimately, the continued growth of mobile payments will depend on the interchangeability, safety, and functionality of payment processing platforms, as well as merchants’ low cost access to them.
Once, news (and money) traveled at the pace of one person on foot; now it travels at the speed of light. Technology, in the form of mobile payment systems, will underwrite economic development in the majority of African countries, leapfrogging these nations past what was once required: investment and infrastructure. Indeed, a strong, unified, interchangeable system will build the economy to pay for infrastructure and to provide for the investment. The result will be an improved quality of life.