Why Mastercard just made a $100 million bet on Africa’s mobile money market

A woman walks past a sign advertising the mobile banking service Airtel Money in Freetown.
A woman walks past a sign advertising the mobile banking service Airtel Money in Freetown.
Image: Reuters/Simon Akam
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The $100 million investment from global payments giant Mastercard in the mobile money business arm of Airtel Africa announced this week is a sign of the rapid growth and optimism in Africa’s digital payment sector.

The transaction values the subsidiary, Airtel Mobile Commerce, at $2.65 billion. It follows a $200 million investment in the company by TPG’s Rise Fund just two weeks ago. Both TPG and Mastercard now have minority stakes in the company.

More than half of the world’s mobile money services are located in Africa, according to a recent report by GSMA, making it a fertile market for investors. Mobile money services are defined as being accessible to people who do not have formal bank accounts.

Airtel Africa is a London-headquartered company operating in 14 African countries. The deal will make major African telcos spin off their mobile money platforms as a way to accelerate growth, says George Bodo, the CEO of Callstreet Research and Analytics, a Kenya-based investment and market research platform. Just last month, South Africa’s MTN said it was considering spinning off its financial services unit and potentially listing it to unlock value in its core business.

Another implication, Bondo adds, will be a growing convergence between mobile wallets and cards, as more card payment platforms seek to onboard mobile wallets. Last year, Safaricom, a Kenyan mobile network operator, partnered with the payment processing company Visa to enable the development of products that will support digital payments for customers of M-Pesa, the company’s mobile money service.

The partnership between Mastercard and Airtel Africa demonstrates that traditional payment service providers are making strides in adopting non-traditional payment technologies, says Lisa Kimathi, senior research associate at Standard Investment Bank in Nairobi. Payment service providers are likely targeting a one-stop shop business model. As a result, “we expect to see some healthy competition on the payments front, as well as innovations in products and services, a welcome move in a continent where a significant percentage is unbanked,” she says.

“Mobile money has opened up remote areas and kickstarted contactless access to financial services, among many benefits,” Kimathi says. “We are yet to experience its full capability.”

Airtel Africa has an existing relationship with Mastercard, linking up in 2019 to allow the telco’s 100 million subscribers access to Mastercard’s networks. Last year, Airtel Africa also entered a partnership with MoneyGram, enabling Airtel Money customers to receive MoneyGram transfers directly into their mobile wallets from more than 200 countries across the world.

Airtel Africa is exploring listing Airtel Mobile Commerce within four years. Airtel Mobile Commerce is currently the holding company for many of Airtel Africa’s mobile money operations, which operate under the Airtel Money brand. The subsidiary operates in 13 countries in Africa, offering mobile wallet deposit and withdrawals, merchant and commercial payments, loans and savings, virtual credit cards, and international money transfers.

Mobile money is a competitive arena with a mix of new startups, but dominated by longstanding fintech operations like M-Pesa. Last April, Safaricom and Vodacom acquired the M-Pesa brand from the UK’s Vodafone, with ambitious plans for expansion.

Despite the massive growth of mobile money service across the continent, companies have found it challenging to roll out their services seamlessly across multiple countries.

“Each market is unique, hence no one-size-fits-all solution,” says Kimathi. “M-Pesa is a success in Kenya but has previously failed in some African markets.” Kimathi thinks Safaricom and Vodacom’s experience in different countries will help with developing products specifically for each market. “I would view it as a long-term plan to be a financial services provider in Africa,” Kimathi said.

Meanwhile, Mastercard’s battle for market share globally is increasingly taking place via fintech startups, and it has raced to beat Visa as a partner for digital banks and financial startups. Africa is proving to be an important battleground in that competition.

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