Hi Quartz Africa members,
Mobile money has exploded in east Africa, where the continent’s most successful mobile money service, M-Pesa, launched 15 years ago. Founded in Kenya, M-Pesa currently boasts more than 50 million active accounts in almost a dozen countries. West Africa is just beginning to catch up.
“When M-Pesa kicked off in Kenya and began flourishing in and around that region, west Africa was observing,” says Roland Ouattara, a researcher at the Ivorian Center of Economics and Social Sciences of the Félix Houphouët-Boigny in Abidjan, Côte d’Ivoire. “Governments were too cautious to embrace such an unfamiliar industry. Therefore, it took a while for telecommunications companies to be granted licenses to operate mobile money. But the time seems to have come for the boom to take off.”
With roughly 350 million adults still unbanked in sub-Saharan Africa, mobile money is expected to grow and gain wider adoption due to its flexibility and accessibility for the general population. In some countries, most adults already operate a minimum of two mobile money accounts. In 2021, 36.7 billion mobile money transactions were carried out across the continent, according to GSMA.
To expand, mobile money transactions need to be cheaper and easier to use. Wave Mobile Money, a Senegal-based startup, has grown rapidly in its home country as well as Côte d’Ivoire by using QR code technology and charging extremely low fees.
“Within a short period of time, Wave was able to act as a magnet for people seeking cheaper and easier means of sending and receiving funds through their phones,” Ouattara says. “Their strategy has been very effective. All startups need to stop by and take a look.”
💡 The opportunity: Mobile money has been growing in double digits every year, mostly in sub-Saharan Africa. West Africa’s Francophone populations account for around 22% of the total number of active mobile money accounts in the continent, a relatively small proportion.
🤔 The challenge: The two main challenges are policy and funding. In many countries regulators are still wary of granting licenses to startups in the fintech sector. Even once in operation, companies may need approvals to launch new products and services. Secondly, a huge volume of capital is needed to float such startups. With many fintechs already in the market, convincing investors to bet on similar products is difficult.
🌍 The road map: New contenders need to come up with products backed with simple technology that can be used even by those who are illiterate or not tech savvy. Also, partnerships are key to expanding and sustaining a business.
💰 The stakeholders: Mobile money companies, users, legislators, governments.
By the digits
518 million: The number of active mobile money accounts around the world, as of the end of 2021
$1 trillion: The total sum of money processed annually by the global mobile money industry, as of end of 2021
184 million: The number of active mobile money accounts in Africa, at the end of 2021.
70%: The share of the African market of the world’s $1 trillion mobile money value.
58 million: The number of active mobile money accounts in west Africa, as of the end of 2021.
$9.3 billion: The annual volume of mobile money transactions in west Africa, as of 2021.
The case study
Wave Mobile Money, an app that allows money transfers and payments, was developed in New York in 2011 by Drew Durbin and Lincoln Quirk, two graduates of Brown University in Providence, Rhode Island. The app was later registered in Senegal in 2016 before a wider launch in 2018. The co-founders raised $13.8 million in seed funding from firms like France-based Partech, Y Combinator, Founders Fund, and Serena Ventures to float their operations in Senegal.
Orange, the French telecom giant, offers a similar digital money service known as Orange Money, and it was the sole player in Senegal, a country of 18 million people, prior to Wave’s arrival. However, Wave quickly took Senegal by storm thanks to its extremely low fees of 1% for sending funds and zero fees for payment of utility bills, as opposed to the existing 3-10%. Wave also uses QR codes, unlike the USSD (Unstructured Supplementary Service Data) still employed by competitors. Users tend to prefer QR codes because they’re easier to use.
Buoyed by its success of opening 6 million active accounts in Senegal, Wave expanded to Cote d’Ivoire in 2021 to challenge three established operators: Orange, MTN, and Moov, all of which offered mobile money services in the relatively bigger market of 29 million people. Wave’s business model gradually gathered momentum before completely disrupting the sector to become one of the dominant actors. This breakthrough happened within a one-year period.
In September 2021, Wave raised $200 million in the biggest Series A funding ever recorded in French-speaking Africa, putting its valuation above the unicorn-making $1 billion threshold, at $1.7 billion. Wave’s management said at that time that the funds were earmarked for product development and market expansion. A year later, Wave is now in five markets: Senegal, Cote d’Ivoire, Mali, Burkina Faso, and Uganda, with a total of 10 million active accounts.
In conversation with
🇸🇳 On launching in Francophone Africa, starting with Senegal:
“West Africa was a deliberate choice for us. There is clearly a strong appetite for innovation and that is what attracted us to the West African Economic and Monetary Union (UEMOA).” [Senegal is a significant destination in its region. Its capital, Dakar, is a financial hub and home to BCEAO, the central bank that issues CFA Francs, the currency shared by eight countries in the UEMOA.]
💪 On Wave’s ambition:
“Wave’s vision is to bring radically inclusive and affordable financial products and services to the population. There is a big gap in financial inclusion, and while traditional mobile money services have existed for over a decade now, west Africa has yet to see the type of explosion and adoption of digital financial services that is experienced in east Africa.”
👩💻 On Wave’s technology and innovation:
“There are two key reasons for choosing QR code technology. One: Not everybody has a smartphone or the means to keep the smartphone regularly charged and with live data bundles. And two: limited literacy levels. People that fall within this segment of the population are the most vulnerable and often are the victims of fraud. QR code cards enable this segment of the population to use Wave, which is extremely affordable to them, and to do an agent-assisted transaction without compromising on security.
💰 On fees, pricing and the future:
“Our vision is to offer our customers (both people and businesses) a range of financial services that they will need in their lifetime. The P2P transfers and bill payments are just the start. We plan to offer merchant payments, bulk payments, microcredit, insurance, and more, in partnership with other institutions. 1% of all of these payments flowing through an entire economy is not an unprofitable business.”
Fintech deals to 👀
Bizao, an Ivorian fintech startup, raised $8.2 million in July in a Series A funding, from a host of angel investors including AfricInvest, Adelie, and Seedstars Africa Ventures. The Abidjan-based firm was founded in 2019 and has expanded to nine African countries, collectively processing over 350 million payment requests per month.
NowNow Digital Systems, a Nigerian fintech startup, raised $13 million this month in seed funding, led by NeoVision Ventures Ltd, DLF Family Office, and Shadi Abdulhadi. The four-year-old company, which operates mainly in Nigeria, provides financial services to the unbanked and under-served.
Zeepay, a Ghanaian fintech firm, raised $10 million in medium-term debt funding this month from Verdant Capital, an African corporate finance firm. Founded in 2014, Zeepay offers domestic and international fund transfers via digital wallets in 20 African countries and also serves markets in the Americas and Europe via partners.
More from Quartz Africa
🔀 Why Africa’s digital payment landscape is still highly fragmented
🤔 A new African payments platform is a push for independence from the dollar
⛓️ Major Africa’s banks are using a blockchain-based payments processor
📋 Everything you need to know about fintech financing
❄️ To scale up, Africa’s fintech startups have to diversify
♫ This brief was produced while listening to “Lucky” by Sarkodie ft Rudeboy (Ghana / Nigeria) ♫
Have a wonderful and fruitful week
—Kingsley Kobo, Abidjan
One 📱 thing
East Africa remains the continent’s mobile money hub, with the highest number of registered and active accounts as well as transaction volume and value. However, west Africa has witnessed the highest growth rate in the sector of late, prompting some observers to suggest that the region could be the next digital money giant in Africa. As of 2021, in all the mobile money services combined, west Africa experienced growth of 124% (pdf) as opposed to 76% for east Africa.