Mobile banking series: An overview of why mobile banking remains important for financial inclusion in Africa

As the world’s last frontier, Africa continues to be on a positive growth trajectory and all indications are that the growth will only intensify going into the future. Currently, the African population is estimated at over one billion people and it is estimated that over 50% of the overall population will be living in cities by 2030. This rapid urbanisation will have to be matched with acceleration in infrastructure development to support people’s livelihood and commercial activities alike.

Business Monitor estimated that the value of transactions would increase from $12 billion in 2011 to $85 billion in 2016 in the continent. According to the African Development Bank, annual consumer expenditure will reach $2.2 trillion by 2030. Viable growth in commercial activity will be crucially dependent on similar growth in payments infrastructure to support the volumes of transactions associated with projected levels of consumer expenditure.

A case exists for mobile banking and mobile payment to also play a greater role in commerce. Mobile banking refers to the provision of banking services to customers through mobile devices. Mobile payments, meanwhile, refer to the transfer of funds or any other form of value through mobile devices in return for goods and services.


These payments can be executed either in proximity or remotely. Together with mobile retail, they collectively represent what is referred to as M-Commerce. In M-Commerce there are a number of regulatory frameworks governing banks, telecommunications operators, technology companies, merchants, and other players involved in the mobile money ecosystem.

These frameworks primarily seek to uphold the safety and security of financial transactions as well as to protect personal information. Even though some countries have clear frameworks, there are markets where the regulatory frameworks are not established enough to clarify the market turfs; for example, for telecommunications operators vs. banks.

Mobile banking is set to grow in the continent for a number of reasons. Firstly, there is the fact that generally Africa has a low base of physical banking infrastructure. According to a British Magazine, Technology Banker, in 2009 there were roughly 36,000 ATM’s in the continent, most of these in South Africa.

Mobile banking set to grow in Africa

A 2011 World Bank research paper suggested that the number of ATMs per 100,000 adults was 59.58 in South Africa. The picture is somewhat skewed when this ratio is compared to South Africa’s neighbouring countries like Lesotho (7.3), Mozambique at 5.7, and Namibia at 30. The same ratio in the European Union stood at 70.

In addition to lack of physical infrastructure, the continent’s internet penetration rate remains the lowest in the world. The opportunity is that, with the high cellphone penetration rates across the continent, Africa may not need to catch with respect to traditional banking and payments infrastructure.

Secondly, the pricing regimes for existing infrastructure such as ATMs and cards are not responsive to the economic realities of most African markets. Exacerbated by the local currencies performances, this affordability challenge is even greater in the international money transfer domain. Most African economies are dependent on international money transfers due to the large number of African expats all over the world.

Leveraging mobile technology

According to an online publication, the African Focus, remittance flows to Sub Saharan Africa were estimated at $21 billion a year from 2008 to 2010 and increased to $24 billion in 2012. The transfer cost, according to the World Bank was 11.57% per $200 in the third quarter of 2011 in Sub Saharan Africa, the highest average cost compared to other parts of the world. This certainly positions mobile payments as an alternative channel that is real time cost effective.

Lastly, one of the major social imperatives that cut across the continent is the challenge of financial inclusion. There are varying statistics around the number on unbanked adults in the continent. What remains clear is that access to financial services and not just bank accounts is a major issue. The economies of Africa will not reach their potential if access to financial services does not reach the broader sections of the populace.

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About Olebogeng Mogale

Olebogeng Mogale is an Associate Director at KPMG Management Consulting focusing in Financial Services. He heads up the firm’s Pan African Mobile Banking capability. Olebogeng has extensive management consulting and systems integration experience spanning over 11 years, mainly in banking institutions in South Africa and abroad. He has a led a number of business transformation initiatives in other sectors including mining, public service, and the automotive sector. Over his consulting career Olebogeng has worked in SAP implementations; two major core banking transformations for a large international corporate bank and a large South African retail bank. In this regard he has worked in Operating Models; Business Process Design; Customer Channels; Finance Transformation; Payments; and Regulatory Change. Olebogeng led a Business Process stream for Mobile Banking for a larger South African bank as part of the go-to market strategy for Inclusive Banking. He has in depth understanding of the community banking ecosystem and its payment landscape thereof. Qualifications: BSc Information Technology; Masters in Information Technology

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3 Responses to Mobile banking series: An overview of why mobile banking remains important for financial inclusion in Africa

  1. Mayank Naik April 22, 2013 at 2:32 pm #

    Thanks for the article – interesting to see that telcos and banks are already joining forces in entering the inter-country money transfer market within Africa. More exciting though, is that their fees are lower than the average 11.57% and that this service is purely based on mobile (SMS technology which is enabled on all basic cellphones, feature phones and smartphones). The perfect combination to address the social imperative of high unbanked stats, low internet penetration, high urbanisation and high inter-country transfer costs).

    • Olebogeng Mogale April 23, 2013 at 12:39 pm #

      You are absolutely right Mayank. Mobile Money concept which started as Prepaid Mobile Wallet and was primarily used for in-country P2P money transfers; is now expanding wings and deploying innovative ways of virtual money usage and consumption. This is well supported by collaborations between Banks, Telcos and independent players such as Western Union and Home Send which are providing indirect platform for mobile money interoperability.
      Thanks Ole

  2. Avela Gronemeyer April 29, 2013 at 9:43 pm #

    A well written, well researched article. The future of banking in Africa is mobile and hopefully banks are including this as a central part of their Africa strategies. In the same way that mobile phones overtook traditional landline services as the infrastructure wasn’t there or was too expensive, so will mobile banking run miles ahead of traditional bankin – and that at a lower cost (as you point out). There are, today, mobile phones in almost every village in Africa, presenting a fantastic oppportunity for banks to leverage that footprint. Security and trust are probably going to be the biggest challenges.

    I look forward to seeing this revolution!

    Keep the informative articles coming!

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