Africa’s unbanked market is being tapped, thanks to savvy partnerships between telecoms and financial companies


Stafford Masie has a picture in his office. It doesn’t remind him of one of his many business successes (after all, he used to be Google’s country manager in SA and launched the brand in the country). Instead, it helps him remember one of his greatest failures.

A few years ago, a woman lost her child to exposure because her electricity was cut off when she couldn’t pay her bills. She had the money but lacked the ability or infrastructure to make payments and settle her debts. The woman’s photograph is a reminder of what he calls the consequences of insufficient innovation.

In May this year, Masie addressed a group of visiting executive MBA students from HEC Paris at UCT’s Graduate School of Business. He said the combination of social and infrastructural challenges faced throughout Africa meant that products made on the continent simply had to find ways to work.

‘In Australia, for example, everyone has power; everyone has literacy. It is easy over there. Here, because of our constraints, we have to innovate. If it works here, it will work anywhere. We walk in with legitimacy right away.’

He pointed out that Africa’s innovations are not market-driven. ‘We do not produce things that make people click “like”. But the next Facebook of agriculture, the next Twitter of water purification will come from Africa.’

In terms of the banking in and African context, Masie explained that Africa is ahead of the world as it deals with ‘socio-economic challenges that are a bit different. This is not about Africa catching up. We lead the way’.

Masie founded Thumbzup and recently partnered with Absa to launch the Absa Payment Pebble which, he says, ‘converts the customer’s phone into a card payments-acceptance device’. It’s one of a rising tide of mobile banking innovations that are tapping into what’s left of the unbanked segment of SA’s population. These new products and services are shaking up the traditional banking model, changing the relationship between retailers, banks and customers, while driving local business to come up with locally relevant solutions.

Multinational consulting company McKinsey & Company estimates that more than three-quarters of sub-Saharan African adults still don’t have accounts at formal financial institutions – but that number is steadily decreasing as the continent embraces the opportunities provided by mobile payments.

As Arrie Rautenbach, head of retail banking at Barclays Africa, explains, the way people pay for transactions is changing across the world, but in Africa and SA especially.

‘A breakdown of customer payment methods provides insight. Cash is still king – it accounts for the most of value transfer in commerce in Africa. But alternative payments are gaining traction. In many markets across Africa, card payments – while still limited – are growing and e-commerce is growing aggressively. Mobile point-of-sale [mPOS] growth has been nothing short of phenomenal.’

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‘It gives smart developers and companies looking to gain a competitive edge a clear window of opportunity’


By comparison, SA is a relatively conservative market with regard to mPOS adoption. People still tend to make over-the-counter payments using hard cash or plastic. But even here, SA has more than 10 000 mPOS devices in circulation since these were first brought to market.

‘Much of the rhetoric behind the product revolution involves tapping into the unbanked sector of the market,’ says Rautenbach. ‘According to Vodacom’s estimates, there are 7 million people in South Africa who earn salaries but do not have their own bank accounts, which represents about 14% of the population. In the rest of Africa, this figure is a lot higher: the organisers of the Mobile Money Africa conference in 2013 estimated that 80% of adults on the continent were still unbanked.’

The world’s tech-development heavyweights are all trying to grab their slice of that enormous mobile banking pie – from Apple Pay to Google Wallet to Pay (Samsung’s Android offering). These global systems operate on a technology called near field communications (NFC), where a chip inside your smartphone/tablet/watch communicates wirelessly with a similar chip at the point of sale. Payment information is then simply (and securely) transferred to the payment system with a tap or swipe of your device. Easy.

Christopher Dawson, mobile practice lead at software developer DVT, says that apart from NFC, these technologies have something else more important in common: none are available in SA. ‘This oversight may not necessarily be a bad thing. It gives smart developers and companies looking to gain a competitive edge in the market a clear window of opportunity. There is a space for homegrown mobile payment solutions to strengthen, at least until we see the big names such as Apple Pay and Android Pay entering the local market.’

Dawson points to locally developed mobile payment systems such as SnapScan, Zapper and FlickPay, which offer contactless mobile payment via smart device and have growing customer bases in the country. Again, though, these technologies have something in common: instead of NFC, these three systems use quick response (QR) codes, into which the payment information is embedded and processed via a code-reading app on the user’s mobile device.

‘QR is less flexible than NFC,’ says Dawson. ‘While some apps give payers some degree of flexibility – like splitting a bill at a restaurant for example – QR codes are generally fixed and have to be regenerated if any of the information they hold needs to be changed. Herein lies the opportunity for smart SA developers looking to leapfrog the technology we already have and steal a march on the technology that’s yet to come. Since NFC chips are already standard in the newer smart devices we use, we have the hardware in place to support the software we’re free to develop.’

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‘7 million people in South Africa earn salaries but do not have their own bank accounts’

Africa is already blazing a trail in mobile money. A recent Boston Consulting Group report, titled (as if to underline the point) Africa Blazes a Trail in Mobile Money, states that sub-Saharan Africa has the highest number of registered mobile-financial-service accounts in the world (98 million as of 2012, compared to 36 million a piece in South Asia, the Middle East and North Africa). The region also has the highest proportion of active accounts (43%). ‘But when you look a little deeper, it becomes apparent that the mobile financial-service market in Africa is not as advanced as some might think.

‘Around the world, there are roughly 200 mobile money services but only a dozen have more than 1 million users, and the mobile money market in sub-Saharan Africa is equally fragmented,’ states the report. The exception is Kenya, where a combination of good luck and government support helped M-Pesa become the dominant service.

Vahid Monadjem, CEO of mPOS terminal developers Nomanini, sounded a similar word of warning in a blog post he wrote while preparing to address the Africa Financial Services Investment conference in the UK in May.

‘Mobile money is clearly a great story and a tale of African success, but it has perhaps been overemphasised when it comes to its ability to bank the unbanked,’ he says. ‘Things are further behind than people think, but too often it feels like those of us that say so are yelling against a wind of “we have arrived”, when really we haven’t yet.

‘Mobile money has been an exceptional development for the continent. In a couple of use cases mobile money has cracked it, and it really has raised the bar in terms of being a proven electronic means of transaction and storage. Yet in terms of “banking the unbanked”, it has yet to really figure out its role. The average transaction value on M-Pesa is $29, which is a lot if you are earning $2 per day. Mobile money has a way to go to banking those at the bottom of the pyramid.’

Monadjem clearly can’t wait for that day to come. He tells the story of how he lost his wallet while travelling recently, had no credit card and was forced to operate only with cash. ‘It is amazing the level of risk you’re bearing,’ he says. ‘Now imagine if every cent you owned was on your person or in your bedroom. Mine was a small fraction of the worry that many unbanked people bear.’

For SA’s banked and unbanked individuals (let alone our travellers who have lost their wallets), mobile money is already changing our point-of-sale experience. But for our banks, retailers and financial service tech developers, there is still a fair way to go.

By Will Sinclair
Image: Andy Rudak/Bransch