How Telecom Are Driving Mobile Payments in Africa

Telecom companies are at the forefront of Africa’s mobile payment revolution, with over 144 providers operating in sub-Saharan Africa. Over the past ten years, telecom have played a pivotal role in expanding mobile money services by introducing innovative payment solutions and leveraging their extensive customer networks.

The interoperability of mobile money services has significantly improved since 2018, enabling seamless transactions across various operators. By 2018, 80% of mobile money providers’ revenue came from customer fees, but this dropped to 67% in 2019. This shift reflects a transition to platform-based payment models and highlights the growing complexity of revenue streams, including the integration of complementary financial services.

Consumers have moved beyond basic peer-to-peer (P2P) transfers and cash operations (Wallets 1.0) to more advanced financial services like bill payments, savings, loans, and insurance (Wallets 2.0). In 2022, bill payment transactions saw remarkable growth, surging by 36% to nearly $88 billion.

As these services evolve, Wallets 2.0 is giving way to Wallets 3.0, offering feature-rich capabilities such as in-app shopping, access to diverse services, and seamless integration with online merchants and platforms. The GSMA’s State of the Industry Report on Mobile Money 2023 revealed a 48% increase in monthly active merchants accepting mobile money between September 2021 and June 2022.

This evolution is transforming the financial landscape, fostering tighter connections between customers and businesses. It signals a significant shift in financial systems, enabling a more interconnected and accessible business environment. Smartphone adoption further propels this innovation, with the number of smartphone connections in Africa expected to reach nearly 700 million by 2025, offering telcos even greater opportunities.

While banks are collaborating with telecom operators to combine their regulatory and lending expertise with telcos’ extensive networks, telecom companies are also moving independently into lending, insurance, and savings. This diversification reduces reliance on a single revenue source while increasing their competitive edge.

Mobile money has revolutionized financial inclusion in underserved regions, providing vital tools to enhance economic stability. Although banks can offer more extensive services, telcos hold a strategic advantage due to their scale, customer data, and ability to cater to unbanked populations.

Ultimately, the winners in this space will be those who can rapidly scale their services and innovate to meet evolving customer needs. With their existing reach and data-driven capabilities, telecom are well-positioned to lead the digital payments revolution in Africa.