M-commerce holds promise for bankers in Africa and beyond

M-commerce in Africa - Perspectives

M-commerce, fuelled by mobile banking and payments technology, may be the winning formula for African banks to profit from long-anticipated economic growth on the continent.

Global Head of Banking and Capital Markets

KPMG in the UK


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By Olebogeng Mogale, Associate Director, KPMG in South Africa.

With Africa predicted to be the next economic growth story, African banks stand to profit from rising incomes and transaction volumes. Mobile banking and payments can help African banks overcome the continent’s operating hurdles. It may also help global banks tackle their own challenges in developed markets.

Often considered the world’s last frontier, Africa shows considerable growth potential. With a massive, rapidly urbanizing population, and accelerating commercial activity, there is growing demand for payments infrastructure to support the associated volumes of consumer expenditure.

For example, Business Monitor estimated that continental transaction value will reach $85 billion by 2016, up from $12 billion in 2011, and the African Development Bank advises that annual consumer expenditure will reach $2.2 trillion by 2030.

To meet this demand, observers point to ‘M-Commerce,’ the combination of mobile banking, mobile payments and mobile retail, to enable customers to access banking services and transfer funds via mobile devices in return for goods and services. Beyond the technology, M-Commerce involves the regulatory frameworks needed to govern banks, telecomm firms, merchants and others involved in the mobile money ecosystem, to uphold transaction safety, security and privacy. 


Mobile banking is well-suited to Africa, due to limited physical banking infrastructure in most nations and the prohibitive costs of banks expanding their branch and ATM networks. High cellphone penetration rates – paired with mobile banking and payments – could allow banks to catch up without building traditional banking and payments infrastructure.

Mobile banking also supports the social imperatives of African governments that realize they must increase financial inclusion – particularly public access to financial services – in order for Africa to reach its potential. They also recognize that, with many African countries dependent on international money transfers, mobile payments could improve the flow of inbound remittances and reduce transaction costs.

The impact of mobile technology is showcased in Kenya, where more than 19.5 million cellphone users are now subscribers to the mobile money platform, M-Pesa, introduced by mobile operator Safaricom and utilized by 10 Kenyan banks. Considered one of the most developed mobile payment systems in the world, M-Pesa was the result of collaboration among the telecom industry, banks and others to bring mobile banking to consumers. The government also praises the system as a means to make social service and welfare disbursements and conduct financial literacy campaigns.

Naturally, other African countries need to adapt the Kenyan model to their own needs, address crucial regulatory and security issues, and consider ways to build a Pan African framework to enable M-commerce to flow across borders.

For individual banks, mobile technology enables them to develop specific value propositions targeting previously unbanked segments of the population. With this low-cost platform they can differentiate themselves through service innovation. These banks can reach new customers and communities, and also grow assets and strengthen their balance sheets to satisfy regulators.

While mobile banking and payments create a commercially-viable business model for African banks, global bankers may also consider how M-Commerce can help them reduce their cost-to-serve customers and enhance the client experience.


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