Africa is a big place. With a total area of roughly 30 million square kilometres, it could easily swallow up Russia, China, the UK and France, with just enough space left over to fit in India, for good measure.
Ultimately, we believe Africans will be using their handsets to make payments in years to come.
With this kind of perspective, it's easy to appreciate how sparsely located the continent's one billion residents are. In terms of population density, Africa measures in at 65 people per square mile. Comparatively, there are 134 people per square mile in Europe, while Asia tips the scale at a startling 203 people by the same measure.
Throw a notoriously challenging geographical environment and lagging infrastructure into the mix and one can quickly visualise the difficulties many Africans are forced to overcome in order to access basic amenities.
Bricks and mortar banking facilities are a rarity. Although Africa's major city centres are well equipped, rural residents are often forced to draw large sums at ATMs during infrequent and costly visits to urban areas.
Similarly, most rural merchants are forced to take payment in physical values. Only a precious few provide debit or credit card facilities.
To address this demand, several telecommunications operators throughout Africa recently launched mobile wallets that allow users to purchase airtime, accept micro payments and make transfers to fellow subscribers via cellular networks.
Low usage
M-Pesa is one such example. Introduced by Kenyan operator Safaricom in 2007, it has since expanded to incorporate several African countries as well as mobile subscribers on the Vodacom network.
According to Carmen Whateley, managing executive of financial services at Vodacom, M-Pesa is growing rapidly.
"The number of active M-Pesa customers in Tanzania is growing at over 70% per year and has reached 4.7 million. M-Pesa now accounts for 75% of Tanzania's overall data revenue. We also recently launched M-Pesa in the Democratic Republic of the Congo and will expand the service to Mozambique and Lesotho by the end of the year."
Despite this success, M-Pesa and similar offerings have failed to gain traction in some of Africa's more established nations.
"In South Africa, penetration and usage have been much lower. Two key factors we believe have had an impact are the relatively high proportion of the population with bank accounts and the practical challenges of applying for customer registration due to stringent regulatory requirements."
Interoperability
David Parratt, head of new business development at mobile payment technology developer Oltio, believes the answer may lie in the interoperability of mobile wallet solutions.
New technology is the main driver in bridging the gap between banked and unbanked on the African continent.
"The vast majority of mobile wallet offerings in Africa are closed-loop payment mechanisms. This means that only subscribers on that particular network can participate."
This argument may suggest that in regions such as SA, where the mobile market is highly competitive, the interoperability of mobile wallets may be hampering their growth.
The solution, says Parratt, lies in the adoption of a ubiquitous payment mechanism that uses the mobile phone to make transactions, in favour of a bank-issued card or physical notes.
"Oltio believes that the card form factor will eventually be replaced with the mobile phone. This technology already exists. In terms of security, handsets offer a far richer data output - we can facilitate payments via an MSISDN, SIM or serial number as opposed to a four- or five-digit PIN.
"Ultimately, we believe Africans will be using their handsets to make payments in years to come."
International transactional services giant MasterCard appears to agree. During February's Mobile World Congress, in Barcelona, the organisation announced a formal partnership with Oltio and eServGlobal to reach the unbanked via mobile phones.
"Around 85% of transactions globally are still conducted in paper - that is, cash or cheques. This percentage is even higher in Africa, where the majority of the continent's population is unbanked or is solely reliant on cash," says Sanjiv Purushotham, MasterCard senior business leader for business expansion, Middle East and Africa.
"New technology is the main driver in bridging the gap between banked and unbanked on the African continent. We believe mobile payments will continue to gain momentum in both emerging and developed economies. The form factors may change, but the underlying trust in making payments happen will remain."
First published in the May 2013 issue of ITWeb Brainstorm magazine.
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