Worldwide, the mobile payments sector is booming.
In 2022, the global industry was valued at $2.3 trillion, and it is expected to grow to $18.84 trillion by 20301. There are many factors behind this, including the need for effective solutions that help integrate people into the financial system, and the skyrocketing volume of international transactions, due both to more people – including self-employed individuals – doing business internationally, and to remittances.
Another driver is the increased adoption of smartphones, an enabler of economic opportunities. This is especially true in developing regions, where, because there is no basic infrastructure in place, digital companies play a paramount role – that of building the foundations to democratise access to products and services that, if used effectively, can lift billions of people out of poverty. Such is the case of Africa.
Africa’s e-payments market has been registering explosive growth, which McKinsey estimates at 20 per cent per year2, with the market value expected to reach $40 billion by 2025. Here, I will outline five reasons why I believe that, in the African continent, the best is yet to come in terms of the mobile payments sector, and share some examples of outstanding companies that are already thriving.
Limited banking access
Approximately half of Africa’s population3 lacks adequate access to banking services. This means that, throughout the continent, there are over 350 million adults who cannot access services4 that we can easily take for granted, including savings accounts and lines of credit.
This glaring disparity is an economic hurdle, and one that innovative entrepreneurs have quickly turned into an opportunity. Given the growing adoption of digital banking, which even African banks estimate at 20-30 per cent, according to McKinsey5, neobanks and financial technology (fintech) companies are emerging, leapfrogging conventional infrastructures and helping the continent shape its own financial future.
Africa is a continent known for its powerful entrepreneurial spirit. According to a World Bank report focused on sub-Saharan Africa6, roughly 42 per cent of the non-agricultural workforce is composed of people who are either self-employed or employers. Especially remarkable is the fact that, in this regard, women lead the charge, representing 58 per cent of the continent’s self-employed population. However, the lack of basic financial tools still represents a hindrance. For the region’s entrepreneurial force to be fully unleashed, digitalisation and access to financial services are a must.
Africa’s ongoing fintech revolution
Africa is already home to a burgeoning fintech revolution, which is being spearheaded by mobile payment platforms and neobanks￼7. A neobank is a bank that operates completely digitally, through either a website or a mobile app.
Because neobanks don’t have the behemoth infrastructure that conventional banks do, their costs are lower, and this allows them to make their services more affordable. This value proposition has allowed neobanks to reach a sizeable segment of the African population and to grow at over 22 per cent8 by offering a comprehensive suite of financial services like savings accounts, loans, and insurance.
Growing smartphone adoption
The success of digital financial institutions is largely possible because of the skyrocketing adoption of smartphones. According to a recent report, by 2030 sub-Saharan Africa is projected to reach a smartphone adoption level of 87 per cent9. In terms of numbers, this means there will be 613 million unique mobile subscribers by 202510.
Smartphones are putting powerful tools in the hands of younger generations, enabling them to access online job opportunities, increase their earnings, and, at the same time, create a strong demand for efficient payment solutions. As millions of African entrepreneurs realise the magnitude of what the Internet can help them do, they also want to get paid for it, and get paid on time. Smartphones, we could say, are economic enablers.
Public incentives to transition to a cashless economy
Central banks are realising that, for the African economic potential to truly blossom, it needs to be less dependent on cash. As a result, they are offering incentives to people to transition to a cashless economy. Nigeria, for example, launched AfriGo11, which aims to challenge some of the limitations that Nigerians face when attempting to get a debit or credit card, especially the prohibitive fees that many African banks are known for charging.
Thriving players in this space include M-PESA, which, based in Kenya, has become Africa’s most-used money service and now helps people in several other countries: the Democratic Republic of Congo (DRC), Egypt, Ghana, Kenya, Lesotho, Mozambique, and Tanzania. M-PESA has over 50 million customers and processes financial transactions worth over $314 billion on a yearly basis.
Thanks to M-PESA, millions of Africans have been able to lift themselves up from poverty, by getting access to credit backed by their history of financial transactions. Through digital microloans, M-PESA lends $14 million a day12 to entrepreneurs who otherwise had no proof of income, but now do because they also get paid through M-PESA.
SnapScan is another solution that has been making waves. Based in South Africa, SnapScan offers people the option to accept payments digitally in a variety of ways, including in-person through a QR code, effectively transforming any smartphone into a point of sale.
Since its inception, SnapScan has empowered many business owners, from bakers to craft brewers, to expand their payment alternatives and end their ongoing struggles surrounding the question of how and when they are going to get paid. This led SnapScan to be acquired by Standard Bank13, which highlights a trend that could keep occurring in the African continent – the partnership between groundbreaking start-ups and financial institutions that are in dire need of being revamped.
Another important market that peer-to-peer payment platforms need to address is that, for many Africans, opportunities lie abroad. With the emergence of freelancing, it will be more common, especially for digitally literate people, to get jobs overseas and still live in Africa, taking advantage of the lower cost of living.
Also, Africa is at the top of the list in terms of countries receiving remittances. For example, in 2022, Egypt received remittances of $28.3 billion14. While many of these remittances are paid out in cash, there are hefty fees involved, and start-ups like Nigeria-based Waverlite are taking notice of this and offering an alternative15 by integrating fiat currency and cryptocurrency wallets.
To get an idea of how companies like M-PESA, SnapScan, Waverlite, and all the fintech start-ups that are yet to emerge can impact Africa, think about this: 70 per cent of the continent’s GDP16 is driven by micro-, small, and medium-sized businesses. Since Africa’s GDP is almost $3 trillion17, this means that providing accessible financial services to its population is a $1 trillion opportunity.
The companies that win this are those that understand what the continent’s population needs, which is, first and foremost, financial institutions they can trust and that they can afford to use. A report by the WEF said that people in South Africa who were in the low-income bracket could not afford to have a bank account because of the fees involved18. This makes cash considerably more convenient. So there needs to be a considerable effort on behalf of the relevant authorities to boost digital literacy, another crucial success factor of this fintech revolution.
Whether in Johannesburg, Lagos, or Nairobi, the fintech landscape offers a promising path to help African citizens elevate their quality of life and capitalise on financial opportunities. With the growing adoption of smartphones, hundreds of millions of Africans will soon be able to transform their phones into payment terminals and end their days of financial struggle, beginning a new era of inclusive prosperity.
About the Author
Alexey Bogdanov is a serial entrepreneur with over 15 years of experience. He has founded five start-ups, with two of them each generating $20 million annually in revenue. Now, as the founder and CEO of fintech start-up Tofu, Alexey is targeting the market of 9.84 million self-employed individuals in the United States, offering them a comprehensive solutions platform for tax calculation, invoicing, and expense tracking.
- The global mobile payment market size was valued at $2.32 trillion in 2022 and is projected to grow from $2.98 trillion in 2023 to $18.84 trillion by 2030. 2023. Fortune Business Insights. https://www.fortunebusinessinsights.com/industry-reports/mobile-payment-market-100336
- “The future of payments in Africa.” 7 September 2022. McKinsey & Company. https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-payments-in-africa
- “Africa’s Investment Report 2021.” 2021. Briter Intelligence. https://briterbridges.com/africainvestmentreport2021
- “What does it feel like to be unbanked?” 16 March 2023. Africa Nenda. https://www.africanenda.org/en/blog/2023/what-does-it-feel-like-to-be-unbanked#:~:text=Over%20350 percent20million%20financially%20excluded,have%20proof%20of%20legal%20identity.
- “African banking: The productivity opportunity.” 6 December 2022. McKinsey & Company. https://www.mckinsey.com/industries/financial-services/our-insights/african-banking-the-productivity-opportunity
- “Female entrepreneurship, key ingredient for Africa’s growth.” 17 June 2021. iD4D. https://ideas4development.org/en/ffemale-entrepreneurship-key-ingredient-africa-growth/.
- “The rise of neobanks and how they are disrupting traditional banking in Africa. 5 March 2023. Finance Magnates. https://www.financemagnates.com/fintech/education-centre/the-rise-of-neobanks-and-how-they-are-disrupting-traditional-banking-in-africa/.
- “Neobanking – Africa.” 2023. Statista. https://www.statista.com/outlook/dmo/fintech/neobanking/africa.
- “Sub-Saharan Africa embraces 5G and smartphone adoption soars, GSMA report reveals.” 9 June 2023. Business Insider Africa.