When Joyce Rejista ran out of money at a music festival, she found herself in a situation familiar to Malawian villagers, needing cash in places where banks and ATMs are scarce.
The obvious answer was a mobile money service run by telecommunications companies Airtel or TNM, which have taken advantage of widespread mobile phone networks to rack up more account holders than the major banks in Africa.
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But when Rejista, 28, asked a friend in Blantyre, the commercial capital of Malawi, for help, she was told to sign up for a new Standard Bank service so she could send her the money.
After long ignoring the target market for mobile money in favor of higher-income Africans who can serve their more lucrative traditional products, Africa’s traditional banks are now looking to elbow their way into telecommunications territory.
With much of Africa’s population having limited access to financial services, the continent is one of the most attractive banking opportunities in the world as incomes grow.
While bank revenue dwarfs that of mobile money, in terms of number of users, the latter is a clear winner. As telecommunications companies pursue a growing number of revenue streams from banks, they can no longer ignore their success.
Standard Bank, Africa’s largest lender by assets, is rolling out its mobile money-style product, called Unayo, across the continent and aims to have it in all of its markets by the end of 2023, Wally Fisher, head of the service. adding that it also focuses on providing online services such as loans.
Unayo aims to gain a significant share of the mobile money market in the short term and believes that it can capture at least 1% of around $ 90 billion in remittances and donor aid payments made each year in its markets as income, Fisher said.
“It can very quickly result in a significant contribution to the bottom line in the next two or three years.”
In Malawi, fewer than 170 out of 1,000 adults have deposits in a bank account, while nearly 600 have a mobile money account, according to 2019 IMF statistics.
And across the continent, there were 548 million registered mobile money accounts in 2020, according to the Global System for Mobile Communications Association (GSMA).
While banks have sought to partner with telcos, matching their licenses and lending expertise with massive mobile networks, operators increasingly seek to offer loans, insurance, savings and more without their help, and redoubled their efforts during the pandemic.
Orange obtained its own banking license, while others partnered with smaller banks. MTN and Airtel can now collect deposits in Nigeria, which is the most populous country in Africa.
Banks are following suit. Fisher said Standard Bank would seek partnerships where they add value, but for now was focused on building Unayo.
Nedbank is discussing partnerships, but is also looking to offer products where it sees opportunities, said its director of retail transactions, forex and investments, Vanesha Palani.
While it only operates its mobile money offering in South Africa, Nedbank seeks to expand it across the continent in the short term and enable new services such as cross-border loans and remittances, Palani said.
But pursuing individual strategies too aggressively runs the risk of damaging the potential to forge critical partnerships for growth in many markets, said Vinolan David, director of cards and payments for Absa’s regional operations.
However, the bank has now built its own standalone product and plans to launch it in countries such as Zambia, Tanzania, Ghana and Uganda in the coming months.
While partnerships still dominate, a growing number of banks are pursuing independent strategies on mobile wallets and loans, said Francois Jurd de Girancourt, director of McKinsey’s financial institutions practice for Africa.
Making financial services accessible without traditional infrastructure is a key criterion for success.
In addition to mobile phones, telecommunications companies recruit networks of “agents”, often small shops or street vendors, who can offer key services such as cash inflows or outflows even in rural areas.
Unayo is building its own agent network and has signed more than 6,500 in Malawi and more than 50,000 users so far, Fisher said.
Nedbank is also looking to incorporate small or informal merchants. This also provides business banking opportunities that could make your mobile wallet a decent income generator, Palani added.
Absa’s David said his experience so far had shown that the fastest route to user growth was to partner with a telecommunications company.
Telecommunications companies already have a large number of unbanked people on their phone networks, access to unique data to make loans, and in many countries, an advantage.
Banks, on the other hand, can offer a broader range of services, face fewer limits on things like the size or frequency of transactions, and can take advantage of existing relationships – for example, get a large company customer to pay the bills. wages through their wallets.
The winners will be those who can rapidly scale and launch new products to meet customer needs, something mobile money providers have been good at, Jurd de Girancourt said.
“The jury is still out on whether the bank offers will be enough … to really compete with the telcos.”