BCG Perspectives | Mobile

payments in Africa
Graphics for article Logo

9TH DEC 2019

 Global mobile financial services market size has ~$15-
$20 Trillion in transactions, >80% of which is in China

Transactional volume in USD Bn

​6/30/21 ​6/30/21 ​6/30/21

Africa is seen the ​6/30/21

​6/30/21
​6/30/21
​6/30/21
​6/30/21 ​6/30/21
​6/30/21​6/30/21
​6/30/21

cradle of mobile
​6/30/21 ​6/30/21
​6/30/21 ​6/30/21
​6/30/21 ​6/30/21
​6/30/21 ​6/30/21

payments, but has ​6/30/21 ​6/30/21

​6/30/21

now been vastly ​6/30/21

​6/30/21

overtaken by China

Copyright © 2019 by Boston Consulting Group. All rights reserved.

​6/30/21

​6/30/21
​6/30/21

​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21

% of
125% 4% 2% 21% 3% 1%
GDP

Note: M-Commerce, POS and P2P figures exclude China ​6/30/21 ​6/30/21 ​6/30/211
and Africa
1. Includes In-App Payments and Browser Payments
Source: GSMA; eMarketer; GlobalData; The Economist;
press research; BCG analysis 2
 In Africa, only Kenya & Ghana are close to China in terms of mobile money
transaction value

% of GDP transacted via mobile money

​6/30/21

​6/30/21 ​
6/30/21

Copyright © 2019 by Boston Consulting Group. All rights reserved.

​6/30/21
​6/30/21 ​
6/30/21 ​6/30/21
​6/30/21

​<1% ​<1% ​6/30/21

​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21
% of adults using
79% 73% 71% 56% 53% 56% 33% 29% <1% <1% 5%
mobile money

Note: Does not include the use of airtime as a parallel currency / store of value
Source: Press research; Economist; World Bank; BCG analysis 3
Mobile financial services in African facilitates ~$500Bn in transactions, with
~$300Bn through mobile money, and ~$200Bn through mobile banking apps

Mobile money is driving financial

Transactional volume in USD Bn
​6/30/21 ​6/30/21 inclusion in Africa
​Mobile money:
• The primary method used to transfer
$305Bn money in many East and West African
via countries (e.g. Kenya & Ghana)
mobile
money ​Traditional mobile banking transactions:
• Well established in two of Africa's major
markets (i.e. RSA and Nigeria)
• Severely underdeveloped / low

Copyright © 2019 by Boston Consulting Group. All rights reserved.

penetrated in other African countries
​190
​Regardless of market, there is a push
4 11 towards more digital financial solutions,
​6/30/211 ​6/30/21 ​6/30/21 ​6/30/21 • Consumer – process payments, pay bills
and enable various other solutions
• Businesses – growth transactions via
​6/30/21 ​6/30/21 ​6/30/21 increased online access
• Government – increase in tax revenue,
​6/30/21 ​6/30/21 ​6/30/21
due to better traceability

Note: GSMA report was heavily leveraged to understand the mobile money market size; GSMA SOTIR 2018 used to split mobile money into POS and P2P spend.
M-Commerce figure was determined through press research
1. Includes In-App Payments and Browser Payments
Source: GSMA; GlobalData; Safaricom Financials; press research; BCG analysis 4
Banks are losing the battle for mobile payments to
FinTechs in China and TelCo players in Africa

Share of mobile payments in China (%) Share of mobile payments in Africa (%)

​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21

​6/30/21 ​6/30/21 ​6/30/21
​6/30/21 ​6/30/21

Dominated by just Almost 100% mobile

2 companies, banking solutions,
Alipay & WeChat ​6/30/21 not mobile wallet

Copyright © 2019 by Boston Consulting Group. All rights reserved.

based payments
solutions

​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​Total ​6/30/21 ​6/30/21 ​6/30/21 ​6/30/21 ​Total

1. Market size for top 5 countries (represents 76% of total size)

Source: GSMA; eMarketer; GlobalData; The Economist; press research; BCG analysis 5
As non-bank-led mobile payments scale, an increasing
share of the retail banking business may be disrupted…
"Virtuous cycle for mobile payments, as ecosystems
drive further adoption & deepens use of mobile money"

Mobile wallet Storage of cash in mobile

More transactions via More customer data for Scale up by setting up an
actions wallets instead of bank
mobile wallets mobile wallet providers ecosystem
accounts

• Loss of cheap CASA
Impacts on banks' deposit leads to increased
business and cost of funds
profitability
• Reduction in Interest
income due to stifled
• Low utilization of bank
accounts leads to loss in
revenues from payment
• Upward revision of fees
by banks to cover the
• Inability of Banks to launch
tailored products leads to
increased marketing costs
• Inability to do proper credit
scoring leads to bad loans
• Loss of current customers
deposits
• Potential impact on SME
banking business leading
to loss of revenues

Copyright © 2019 by Boston Consulting Group. All rights reserved.

lending business fixed cost, leading to loss and increased loan loss
of customers provisioning

Disruptive • Mobile money transaction • WeChat transaction fee is • Alipay suggest coupons or • Orange now offers
examples value accounts for 50% of 0.1-0.6%1 lower than discounts to its costumers payment of invoices and
GDP credit card providers based on payment history salaries, savings and life
insurance

1. Transaction fee for merchandise stores in WeChat Pay 6

Source: BCG analysis & research
The mobile payments value chain

Mobile Order
Mobile money Customer Cash in / Payment Financial eco- Non-financial
infrastructure processing via
issuance Acquisition Cash out processing system eco-systems
provisioning cust. interface

​Installation and ​Provision of ​Acquisition and CICO typically ​Order and payment processing ​Mobile money ​Mobile money

Copyright © 2019 by Boston Consulting Group. All rights reserved.

maintenance of payment services conducted by an Agent. Agent earns typically real time. Setup allows for facilitating add'l facilitating a
physical infra. to via a mobile commission on deposits / easy to transfer / receive funds. financial services use-case
facilitate device withdrawals. Typically TelCo agent Customer portal is not restrictive, (e.g. Lending) outside of
payments network. Low KYC requirements, since typically USSD supportive payments (e.g.
removing barriers to adoption M-KOPA)

Source: BCG Analysis 7

Each type of player typically has different strengths &
weaknesses across the value chain
Customer
Order Non-
Mobile Mobile Acquisition Financial
Cash in / processing Payment financial
infrastructure money (on-
Cash out via cust. processing
service
service Remarks
provisioning issuance boarding & ecosystem
interface ecosystem
KYC)
• Only banks licensed to
provide added fin. svcs
Banks • Captive customer base
to drive rapid adoption
• Provide best solutions
FinTech in order/pmt.
/ Giant processing

Copyright © 2019 by Boston Consulting Group. All rights reserved.

Tech • Best positioned to
attract digital talent
• Strong agent network
for customer interation
Telcos • Largest captive cust.
base for rapid adoption

​Only telcos ​Telcos & ​Telcos, by far, have largest ​Fintechs typically most ​Banks licensed for fin.
provide banks have agent network for physical digital-savvy, with best svcs.
Remarks mobile existing interactions with ability to develop fast, ​FinTechs suited for non-fin
network customer customers top-notch solutions plays
infrastructur base
e
Source: BCG Analysis Well Poorly 8
Legend: Best positioned
positioned positioned
Universe of use cases
​ Use cases

​ Facilitating payments ​ Building services

​ Consumer ​ Business ​ Government ​ Financial ​ Non-financial

​ C2C ​ B2C ​ G2C ​ Wealth management ​ Mobile top-up

​ Lending ​ Ride share

Copyright © 2019 by Boston Consulting Group. All rights reserved.

​ C2B ​ B2B ​ G2B ​ Insurance ​Log-in/authentication

​ Credit scores ​ Messaging/social

​ C2G ​ B2G ​ G2G ​ Debit/credit cards ​ In-store retail

​ E-commerce
​ Savings
(through third party)

​ E-commerce
(through own Platform)

9
Banks can play different roles, each with different
value propositions & level of customer ownership

Banks need to build further digital

capabilities & find the right non-
Payments + financial service partners; getting this
Financial & Non- Ecosystem right means unlocking high margins & a
Financial services
Orchestrator path to market leadership
In addition to below, able to manage Banks well positioned with the right
and sell adjacent products capabilities, but need to increase scale
Value
Proposition Risk Carrier / (vs Telcos). Key options to resolve

Copyright © 2019 by Boston Consulting Group. All rights reserved.

Back-end Operator scale issues include (1) focussing on
affluent customers and/or (2) pushing
Excellent in equipping others for interbank wallet interoperability
Payments + Client Relationship Banks can partner with incumbent
Financial services
Manager market leaders or other growing
Needs to be great at customer
players if unable to and/or
interaction and advanced analytics uninterested in making a customer-
facing mobile money play

Expected margin No customer relationship Direct customer relationship

Customer ownership 10
5 mobile money strategies for banks to consider, based
on their starting position and choice of role (I/III)
Risk Carrier/Back-end Operator Client Relationship Manager Ecosystem Orchestrator
Large player in
the market

​Scale champion ​Disrupt yourself ​Ecosystem Developer

Copyright © 2019 by Boston Consulting Group. All rights reserved.

Small player in
the market

​API bank of the future ​Niche market player

11
Looking ahead, African markets also differ in their
conduciveness for rapid mobile money penetration
High-level overview ​Key insights
• Advanced and conducive countries
​Latent demand
Strong conditions for market growth
​Ivory Coast because 1/ strong latent demand
100
combined to great supply enablers
​6/30/21 ​6/30/21 or 2/ market already kicked off
90
​6/30/21 ​6/30/21 ​6/30/21 • The next frontier
Medium to high latent demand and
80 ​6/30/21 ease of supply, but several actions
​6/30/21

Copyright © 2019 by Boston Consulting Group. All rights reserved.

must be carried out for market
70 ​6/30/21 kick-off (eg. leverage retailer
network, interoperability,
implement C2G high volume use-
60 cases with central bank…)

50 ​South • Harder-to-crack
Strong differentiation from banks
Africa
and improvement of regulatory
40 framework are required
40 50 60 70 80 90 100
12
​Market enablers
bcg.com