Hi Quartz Africa members,
Mobile money has taken root in sub-Saharan Africa, but it is being held back from its full potential and impact by limited interoperability: the interconnection system that brings together platforms from various operators.
Linking mobile money ecosystems together is crucial in fostering digital financial inclusion. It helps lower costs and allows for faster, seamless transactions across borders, boosting e-commerce and helping digital companies expand to new markets.
The disjointed nature of Africa’s mobile wallets and regulators’ hesitation in allowing cross-border mobile payments have led to the establishment of cross-border switches—payment platforms that link mobile wallets across different countries. Mobile money wallets ranging from EcoCash in Zimbabwe, M-Pesa in Kenya and elsewhere across East Africa, as well as MTN Mobile Money and Orange Money, are now able to offer cross-border payments, thanks to a new kind of fintech player that specifically aims for interoperability across the continent.
Bringing together Africa’s digital economy through payment switches will boost intra-regional trade. It will also allow for the transition of Africa’s informal remittance channels into formal structures.
Cheat Sheet
💡 The opportunity: Regional mobile money payment switches (pdf) are helping Africa’s tech-savvy mostly young population carry out various transactions seamlessly across different mobile money platforms. This is a new frontier of growth in mobile payments.
🤔 The challenge: While Africa’s adoption of mobile phones is growing at a rapid rate, there are other factors that need to be addressed, including increasing internet connectivity, affordability, cybersecurity, and equitable access. Regulatory hurdles are also a challenge.
🌍 The roadmap: Developing and managing secure infrastructure for digital solutions requires extensive knowledge across issues like data privacy and security, interoperability standards, franchise management, biometric tokenization, device security, and more.
💰 The stakeholders: Mobile money companies, regulators such as central banks, finance ministries, banks, remittance companies, and payment switches are all important stakeholders. Other key players include merchants, digital and e-commerce companies, and mobile firms that run mobile wallets.
By the digits
144: The approximate number of mobile money providers in Africa
70%: Africa’s share of the world’s $1 trillion mobile money market
$701.4 billion: Value of Africa’s mobile money transactions in 2021
$1.3 billion: 2021 annual revenue of M-Pesa, one of Africa’s biggest mobile money operators
350 million: Africa’s unbanked adult population
621 million: Number of registered mobile money wallets in Africa
The case study
Name: MFS Africa
Founded: 2009
HQ: Johannesburg
Founder: Dare Okoudjou
Founded in 2009, MFS Africa is championing interoperability of mobile money platforms and other digital payments platforms across Africa’s borders. Founded by Dare Okoudjou, a former executive at mobile telecommunication company MTN’s strategic investments team, MFS Africa connects several mobile money systems in Africa under one payment platform. The platform facilitates transactions across networks, borders, and currencies. It achieves this through a single application processing interface (API) that also ensures compliance with necessary regulations.
MFS Africa’s cross-border payment switch currently covers over 400 mobile wallets across 37 African countries—over 60% of all mobile wallets in sub-Saharan Africa. MFS Africa also connects these mobile money platforms to other digital stores of value such as bank accounts, merchants, and other fintech platforms.
MFS recently made two investments: the acquisitions of Baxi, an agency banking platform in Nigeria, and the US-based Global Technology Partners (GTP), a prepaid card processor with a presence across Africa. These purchases have put MFS on course to become a multichannel payments network for the continent.
GTP will further expand MFS Africa’s offering to the African gig economy, says Okoudjou, with a principal focus on the business travel market as well as digital commerce through implementation of payment card credentials linked to mobile money wallets rather than bank accounts.
In conversation with
📈 On the importance of scaling up
“Africa’s fragmentation of digital payment platforms has long held back the economic and societal potential of consumers, businesses, and organizations. We are building MFS Africa into a safe, sound, scalable, and high-impact pan-African payment infrastructure that will facilitate Africa’s rapidly growing commerce.”
💰 On MFS Africa’s fintech acquisitions
“Our mergers and acquisition strategy has been to partner with and acquire businesses that help us grow the size and potential of the network, thus attracting more partners both throughout Africa and globally. More partners means more possibilities for the millions of African consumers and businesses across the continent.
🚵 On the challenges of a building a pan-African payments switch
“Africa is made up of 54 different countries, most with different languages, legal frameworks, currencies, and regulatory hurdles. These markets also have differing views on the role of fintechs in their economies. For many, traditional financial institutions are still seen as the only avenue through which consumers should transact.”
🤔 On the threats to Africa’s fintech revolution
“Banks are still in a strong position when it comes to the wholesale market, as fintechs ultimately need to partner with at least one traditional lender. There will be winners and losers for sure, but it’s a space where banks still dominate.”
Mobile money deals to 👀
In 2020, MFS Africa acquired Beyonic, an enterprise digital payments platform that operates in Ghana, Uganda, Tanzania, Rwanda, and Kenya. This marked a key milestone for MFS Africa’s move into the small and medium business sector that dominates Africa’s economies.
Zeepay, a Ghanaian fintech with operations across 10 African countries, acquired the Zambian mobile money platform Mangwe in 2021. Zeepay enables cross-border remittances into mobile wallets. In 2020, Zeepay processed 2.4 million transactions valued at $400 million across 10 markets. The acquisition of Mangwe helps it foray into southern Africa.
Wave, a mobile-money start-up in Senegal, raised $200 million in a Series A round in 2021, making it Francophone Africa’s first unicorn at a valuation of $1.7 billion.
More from Quartz Africa
📈 Where did VC investment grow the fastest in 2021?
📋 Everything you need to know about fintech financing
❄️ To scale up, Africa’s fintech startups have to diversify
🌍 Fintech could make or break Africa’s new free-trade area
🕳️ Even Africa’s fintech startups face major funding gaps
🤑 Raising $100 million? For Africa’s startups, it’s now no sweat
🔨 Who is building the tech infrastructure for African businesses?
🎵 This brief was produced while listening to “One and Only” by Nedy Music ft Ruby (Zanzibar and mainland Tanzania)
Have a highly motivated rest of your week,
—Tawanda Karombo, Quartz Africa contributor based in Harare, Zimbabwe
One 📱thing
Mobile money is fast outracing legacy banks in Africa. Mobile money accounts across Africa have hit 621 million while adult bank account holders are estimated to top 456 million by the end of this year.