September 2019

By Alondra Gutierrez and  Sophie Buisset , Smart S&D team

 

Inclusive digital ecosystems have multiplied around the world, and they usually have platforms at their heart—and Africa is no exception. In 2018 the fibrproject.org and Mastercard declared that the entry of super platforms into Africa was inevitable. CGAP (Consultative Group to Assist the Poor) proclaimed that as “super platforms expand and provide increased value propositions to users, it will be only a matter of time before even low-income clients in Africa and elsewhere are drawn in as users of more than one platform.”

With connectivity expanding quickly, and more than half of cell subscribers on the continent using smartphones by 2020 (up from a one-third today), user adoption for these kinds of platforms is expected to peak. As Chinese giants look to grow their market share abroad, Africa will likely become a battleground for financial services. Mobile money providers have foreseen this and have started to reshape the future of mobile money by adopting a platform-based model. Now is the time for MNOs to move away from transaction-fee based models and look for ways to further develop the entire ecosystem by becoming an enabler that connects third parties with consumers.

The future of mobile money

 



WHAT PLATFORMS MEAN FOR AFRICA

Platforms are the center of digital ecosystems and create value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. Deloitte defines the role of the platform business as a provider of “governance structure and a set of standards and protocols that facilitate interactions at scale so that network effects can be unleashed.”

For the last couple of years, platform-based business models have become a key enabler of the digital economy in Africa. Super platforms like Amazon, Facebook, and Alibaba look towards the African market due to its power to scale, its self-sustained ecosystem, and its relatively uncontested market. For instance, when Jack Ma visited Kenya and Rwanda in July 2017, he announced that Alibaba was actively seeking “investment opportunities, partners interested in building logistics centers, and those interested in supporting entrepreneurs.” However, with Sub-Saharan Africa known to be a tough market for foreign companies in general, let alone new sectors like e-commerce, the opportunity for a super-platform most likely would go to a local player like M-pesa.

 

MOBILE MONEY AS A PLATFORM

The platform-based approach that MNOs are aiming for is not only about expanding the ecosystem and incorporating more partners and third parties into the mobile money platform; it also focuses on deepening engagement with subscribers and businesses by offering a frictionless end-to-end experience. MNOs understand that providing all the services subscribers need and managing their expectations will result in loyalty.

When the mobile money offering transforms itself into a platform, there are a number of assets that can be leveraged to grow the ecosystem, all of which translates into new benefits for MNOs. As customers become more present online, the future of mobile money as a platform becomes more promising than ever before. For instance, in Sub-Saharan Africa alone, the mobile penetration rate has doubled in the last five years to 21 percent.

 

Source: GSMA, Roland Berger

 

With a 24% difference in ARPU for the operators who provide adjacent services than those who remain with the traditional mobile money offering, the mobile money proposition becomes even more viable. Here are some examples of how MNOs in Africa are driving the evolution of mobile money as a platform:

 

Mobile Wallet

Source: Mowali hashtag, Twitter

In 2018, MTN and Orange launched a joint venture with the support of the GSMA to enable interoperable payments across Africa. Known as Mowali (‘mobile wallet interoperability’), the service is open to any mobile money provider in Africa, as well as to banks, money transfer operators, and other financial services providers. As of early 2019, Mowali is now available to all MTN and Orange mobile money customers in 22 of Sub-Saharan Africa’s 46 markets.

 

Chat and Social media

Ayoba by MTN
Source: Yoba website

MTN group president and CEO Rob Shuter spoke about the launch of MTN’s “African WeChat,” which is already available in Ivory Coast: “The plan is to integrate MTN Mobile Money (MoMo). This is obviously more relevant in markets where we have MoMo. I’ve made the parallel that it will be the African WeChat, but it will look like a messaging-centric app where you embed a payment mechanism.” Shuter also said the app would integrate SMS capabilities and would benefit the 27 million active MoMo users across 14 different markets. MTN announced earlier in September the partnership with Ayoba messaging app in the hopes of becoming Africa’s “first” Mobile Money AI service. The AI mobile money “assistant” allows users to engage with MTN’s services such as MoMo and XtraTime transactions, recharge airtime and data, as well as provide digital entertainment, news, and the secure sharing of messages, videos, and pictures. 

 

 

E-commerce

Source: Masoko website

Herman Singh, former managing executive of m-commerce at Vodacom from 2014 – 2016, argued that mobile commerce and associated digital services would be the fourth big money spinner for mobile operators as the voice, SMS, and data waves wane. For instance, with Vodacom’s Vouchercloud, customers can use the app to find deals based on their location no matter which network they are on.

On the other hand, Masoko was started in 2017 and became the first e-commerce platform in Africa to be launched by an MNO. Masoko has over 120 active vendors and delivers to 90% of the counties in Kenya. Masoko screens merchants and provides e-commerce enablement services such as payment processing or customer support channels. Safaricom benefits from M-pesa’s dominant position in Kenya’s mobile payments market to scale. Recently, Safaricom announced its intention to expand to other Sub-Saharan countries in 2020. So far the telco has opened its platform to more than 1,600 FinTechs.

 



FINAL THOUGHTS

The mobile money business model is facing the most profound change since the launch of the service more than a decade ago. Leveraging the assets and capabilities of the traditional mobile money model opens the door to new opportunities by adopting a platform-based approach.

Operators seeking to evolve into a platform will dramatically improve the value proposition for both subscribers and merchants. As they move away from fee-based models, revenue growth is secured due to diversification, core business costs are significantly reduced, while gross margin increases. It also positively impacts market share through the increase of gross ads that maintain secure cash flow.

 However, as MNOs evolve into a platform-based model, some challenges must be overcome to ensure their success:

 

Digital inclusion

Connectivity index in africa
Source: GSMA

While mobile money reaches its second decade with 45.5% of Sub-Saharan Africa as registered mobile money customers, MNOs are advised to rethink what it takes to make the shift from the traditional transaction-based model to a digital enabler. Even with connectivity expanding quickly, and more than half of cell subscribers on the continent using smartphones by 2020 (up from a one-third today), digital inclusion remains the main concern for the success of these kinds of platforms. With mobile penetration reached 44% in 2018 and mobile internet adoption currently standing at 24%, the future for the digital ecosystem in Sub-Saharan Africa depends on the maturity level and the digital inclusion. Even with the growth in connectivity index and rapid mobile adoption, three-quarters of the population remains offline.

 

Cultural shift for MNOs

As the current processes and procedures of a telco could not be applied to this kind of model, new ones would need to be implemented. This kind of ecosystem would also demand agility and flexibility as a core attribute for decision making. Platform models play by new rules that pose challenges to traditional firms that operate by old rules.

 

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ABOUT THE AUTHORS

 

Alondra Gutierrez business development managerAlondra Gutierrez

Business Development Manager for Smart S&D product

 

Sophie Buisset Africa ManagerSophie Buisset

Africa Sales Manager for Smart S&D product

 

REFERENCES

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