What Is the Reason for the Success of Mobile Payments in Africa?
It is expected that the entire cost of mobile money transactions in developing nations is estimated to surpass $870 billion by 2026. This development trend is also seen in Sub-Saharan Africa, where mobile payments are forecast to increase by more than 60% within the next five years.
The adoption of mobile money services is considered one of the best primary payment trends in developing markets for 2022, highlighting the relevance of local payment options and might open up the African market to a variety of global e-commerce opportunities.
In the early 2000s, Safaricom, a Kenyan mobile provider, offered one of the very first mobile payment solutions in the Sub-Saharan area. With the launch of new products and additional regional nations into the sector, the relevance of these local payment systems has only grown. Although mobile payments weren’t really accessible in every Sub-Saharan nation since some lacked technological solutions, it has become a widely distributed trend that is spreading to additional African countries. Due to the unique conditions of Sub-Saharan Africa, this payment method has gained popularity.
Even nowadays, more than 50% of the African population experience lack of a regular banking account; therefore, alternatives such as mobile payments are most appropriate for such areas. Because cellphones are commonly accessible throughout the area, mobile money transactions have become the predominant method for African people to purchase services and goods such as groceries, meal delivery, taxi trips, and even energy bills.
Mobile phones in Africa are used very differently than in the United States or Europe; they are frequently not based on monthly membership models, but rather balances are topped up by purchasing prepaid airtime credits, which can be purchased at thousands of shops or agent-kiosks in the most remote locations.
This enables consumers, including people with no bank account or credit card (in other words, the «unbanked population»), to acquire phone credits not only to communicate, but also to top up their phones to pay local businesses for products and services—the easiest and most practical local payment option to use logistically. Acknowledging the reasons for mobile payments’ success in this region can lead to additional global e-commerce prospects for both foreign merchants and African buyers wishing to purchase more worldwide.
Because a large portion of Africa’s population lacks access to banking services, the region is considered one of the world’s most appealing banking possibilities for strengthening the existing finance system and launching new products and increasing financial accessibility. After previously ignoring mobile money’s target audience in favor of higher-income Africans, Africa’s banking institutions are now considering joining the telecoms space as well. This approach by local banks suggests that the mobile banking business will expand more in the future.
At the same time, mobile payment adoption varies per nation in Sub-Saharan Africa, 495 million individuals used mobile services at the end of 2020, accounting for 46 percent of the region’s population. It is expected that by 2025, this figure will have risen to 615 million, representing half of the region’s population. This demonstrates that local payment methods will continue to play an essential role in the expansion of e-commerce not just in Sub-Saharan Africa, but also in fast-growing and developing economies.
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