Equinox Consulting

Innovation corner – African M-banking: When reality outdoes innovation

Gérald Grossan at 2015-09-14 in Le coin des innovations

While developed countries are looking for innovating and rethinking a restrained banking system, Africa is inventing its own banking model, particularly for Mobile Banking. In many ways, this innovation is paving the way for our tomorrow’s bank.


In the next 15 years, about 2 billion people worldwide will be using their mobile phones to pay, borrow and save. In Africa though, Mobile Banking is already a reality. It is substituting traditional banking and accelerating development of e-inclusion through some highly innovative and functional ways. Many initiatives are already operational and deployed through partnerships between operators and/or banks, and in some countries since many years.

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In Kenya, over 75% of adults use M-Pesa application for their regular bill payments: electricity, taxi, etc.

The same is true for many other countries where the use of this application has exponentially increased in these recent years: Tanzania, South Africa, as well as Afghanistan, India and even in Europe with Romania. It has become the no.1 Mobile Banking application in the world: a simple SMS and a low-cost phone is enough to perform transactions; this is what has been, to a large extent, the key to success of this company.

The success of M-Pesa is not an isolated case in Africa solely. Several startups are inventing new solutions to reinforce inclusion of 75% of the Africans currently excluded from the traditional banking system.

Development of a number of smartphones has also lead the way for new applications: Today, Africa has around 100 million smart terminals, whereas this count may rise up to 350 million by 2017 considering the fall in terminal prices with the advent of low-cost versions.

Thus, SnapScan proposes a contactless payment by merely taking a photo with the smartphone. This application allows grey-market merchants to accept payment through a QR code by converting it to purchase vouchers (« cash to goods » variant), and registered merchants to transfer funds to their bank account. Till date, nearly 20,000 registered sellers in South Africa use this service. SnapScan is a strong African competitor to Apple Pay.


African MBanking2

Another application, Afrimarket (Franco-African company which offers « Cash-to-Goods »), allows the African diaspora to help their family by paying off their day-to-day expenditures via a network of partner stores. In Senegal, nearly 80% of fund transfers are directly used to pay for food.

 The Ghanaian startup, Beam, uses Bitcoins to reduce commission fees especially on money transfers from another continent. Their objective is to reduce such fees by one third, so as to move from on average 10% to 3% (more than 7% of the $60 billion sent to the African continent by migrants corresponds to transfer fees). The system is quite straightforward: The customer converts the initial amount into Bitcoins, and through Beam’s mobile service, this amount gets transferred and converted to Ghanaian cedis on the recipient’s mobile. The volatility of bitcoin is reduced to a minimum through a transaction performed in less than ten minutes, a time period far too short for the price variation to have any significant impact on the transfer rates; Beam also collaborates with British Bitcoins brokers.

In Nairobi, the startup called BitPesa offers a similar solution. Kenyans staying abroad can send their savings to their loved ones via BitPesa using Bitcoins. The recipients can also convert the Bitcoins in Kenyan shillings, buy credit points directly on M-Pesa and even recharge their phones.

But only the confidence in bitcoins would guarantee the future of these two solutions.

 Halfway between money transfer and bancarization, Wizzit, an application developed for more than 10 years allows customers to pay through direct debit. It has its presence in 7 countries and has enabled a bancarization of more than 7 million people through this mobile service. Wizzit is primarily used to transfer money more securely to parents via mobile; second, it allows to pay through direct debits which also establishes the social position of these new customers.

 All these initiatives are more than just innovating ideas. They are real sustainable and operational alternatives, and a reality in a booming Africa. In this sense, African startups are indeed leading ahead, and bringing to light, innovations that at times don’t yet exist in our old Europe.


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Gérald Grossan


Retail and  SFS

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