The streets of Nairobi, Kenya’s capital, provide a vivid illustration of Africa’s growing embrace of mobile payments. Whether in upscale hotels or among bustling market vendors, one is greeted by the unmistakable glow of the green M-Pesa logo. The omnipresence of mobile money solutions like M-Pesa represents not merely a shift in consumer behaviour but a fundamental transformation in how Africans conduct their financial lives.
A Booming Sector
In 2023, nearly 90 percent of Kenya’s adult population used mobile payment services, a shift echoed across the African continent. Recent statistics reveal that 17 percent of African consumers now utilise digital payments daily, with almost half making use of such services at least once a week. As traditional banking services remain expensive and inaccessible for many, mobile payments have filled this gap, providing a swift, convenient, and cost-effective alternative.
Africa’s digital payments market is on a meteoric rise. Between 2014 and 2021, the number of digital payment users in Sub-Saharan Africa increased by 191 million, according to the World Bank. Moreover, McKinsey estimates project a staggering 152 percent growth in Africa’s digital payments market between 2020 and 2025. This shift has been driven by two critical factors: the continent’s burgeoning young population and increasing smartphone penetration, alongside the rapid expansion of mobile internet coverage.
Accessibility and Affordability
Perhaps the most pivotal factor in mobile money’s success is its accessibility. While opening a traditional bank account often requires stringent prerequisites, owning a mobile phone is much easier. The low barriers to entry make mobile payments attractive to vast segments of the African population, particularly those living in rural or underserved areas. In many instances, a simple SMS suffices to conduct transactions, allowing people without smartphones or internet access to participate in the digital economy.
Cross-border transfers have also seen a sharp increase, aided by the relatively low transaction fees associated with mobile money platforms. For example, the average cost for a $200 mobile payment transfer stands at 2.77 percent, significantly lower than the 6.09 percent levied by traditional banks. This is particularly beneficial in regions with large migrant populations and frequent remittances.
Mobile Money: A Game-Changer
Nowhere is the impact of mobile payments more pronounced than in Kenya. With M-Pesa, launched in 2007 by Safaricom, leading the charge, Kenya has emerged as a global case study in financial inclusion. As of March 2024, 38.7 million Kenyans—approximately 75 percent of the population—are active mobile money users. M-Pesa dominates with a 94.9 percent market share, underscoring its ubiquity.
The appeal of M-Pesa lies in its simplicity. A basic mobile phone, without even requiring an internet connection or a bank card, enables users to send money, make purchases, and pay bills—all via SMS. Over the years, it has evolved into an integrated platform offering deposits, loans, and financial management tools. M-Pesa’s model has since expanded into seven other African countries, consolidating its reputation as the foremost mobile payment platform in the region.
Nigeria, Africa’s most populous nation, is also riding the mobile money wave. By 2020, nearly 80 percent of real-time payment transactions were conducted through mobile phones. South Africa follows closely, with mobile payment applications such as SnapScan and Zapper commonplace across its urban centres.
South-South Cooperation and China’s Role
One of the standout features of Africa’s mobile payment boom has been the role of China-Africa cooperation, particularly in technology and finance. Take PalmPay, a digital payment platform in Nigeria, backed by Chinese investors. Launched with a vision of providing innovative services for underbanked populations, PalmPay now boasts 25 million active users, a fivefold increase over the past year.
In early October 2024, PalmPay introduced a new USSD function, allowing users without smartphones or those with poor internet connectivity to access its services. This move reflects the company’s commitment to expanding financial inclusivity, especially in regions where smartphone penetration remains low. With plans to expand operations across Ghana, Kenya, Uganda, and Tanzania, PalmPay is a prime example of how South-South cooperation is unlocking Africa’s digital potential.
China’s involvement goes beyond financial investment. Since 2012, Huawei has partnered with Safaricom to provide the technological backbone for M-Pesa, ensuring system upgrades and introducing new products and services across the continent.
The Road Ahead
Africa’s mobile payment revolution is far from over. As digital payments become more deeply entrenched, there will be continued innovation and expansion, particularly in cross-border payments and financial inclusion. The success of platforms like M-Pesa and PalmPay demonstrates that Africa is not merely adopting global trends but is at the forefront of fintech innovation, with the potential to serve as a model for other emerging economies.
As mobile payments evolve, Africa is poised to benefit from tailored solutions that address local challenges while driving the continent’s broader economic development. With the support of international partnerships and a young, tech-savvy population, Africa’s digital transformation holds the promise of a more inclusive and dynamic future.
