Is Mobile Money Complementing or Challenging Traditional banking?

By Mbuyoti Silimina

The dawn of digital payment technologies is opening doors to a whole new generation of clientele in Africa whose very first ‘bank’ account is accessed purely through mobile phones. 

Lauded as a revolutionary tool for expanding access to financial services in low resource environments on the continent, the onset of mobile money technology is helping transform economic sectors in many developing countries.

The story of mobile money in Africa begins in Kenya when Safaricom launched its M-PESA solution for peer-to-peer money transfer in 2007. Before that, due to a low rate of banking, sending money to family, friends or business associates could be a big issue.

In Zambia, countless mobile money account holders say financial transactions have been made much easier, thanks to advancements in FinTech.

“With just my mobile phone, I can transact at a low cost. For me, this is a real deal, unlike in the past where access to an existing bank account was hectic,” George Manda told Nkwazi.

Undoubtedly, just as the internet has changed the way people access information and shop for products online, mobile phones are transforming many industries, ranging from finance and travel to advertising and retail. Users can receive, withdraw, and send money without being connected to the formal banking system.

For Sarafina Mambwe, a mobile money agent at Lusaka’s sprawling Kamwala market, “If you check around, many youths including me are self-employed and depend on this sector for survival and in that way, mobile money services are helping in job creation.”

The Bank of Zambia recently disclosed that mobile money platforms had recorded increased usage last year, with numbers growing to 8.6 million users by December 31 compared to around 4.85 million in 2019.

The central bank further hinted that higher mobile money usage in Zambia has coincided with increased financial inclusion over the two corresponding years where financial inclusion in the country increased by 10.1 percentage points last year.

“Zambia has continued to make significant progress in the digital transformation agenda, especially in the area of digital financial services. For example, the number of active MNO (Mobile Network Operator)-based mobile money users increased by 77 percent from 4,852,040 as of December 31, 2019, to 8,607,461 as of December 31, 2020,” BoZ Deputy Governor for Operations Dr Francis Chipimo stated.

According to a 2020 FinScope survey, financial inclusion in Zambia increased 10.1 percent to 69.4 per cent from 59.3 per cent in 2015. This was mainly attributed to mobile money services. Further afield, it is estimated that in Uganda, 43 percent of people have a mobile money account while in Kenya, it’s 72 percent.

With approximately 100,000 plus agent lines officially registered in Zambia, according to the Mobile Money Business Association of Zambia, the sector is contributing significantly to the national treasury in terms of taxes.

Asked whether mobile money service providers are reducing banks’ clientele base, the Bankers Association of Zambia told Nkwazi that the current is beneficial for both parties.

“We’re not in competition with mobile money platforms. It’s a win-win situation for both parties. For instance, mobile money transactions have increased our reach as some clients can do banking online even through mobile platforms that are interconnected with various banking payment platforms such as e-wallet, e-pay and payment vouchers, among others,” Bankers Association of Zambia Public Relations Officer Mirriam Zimba affirmed.

Lusaka based economist Mambo Haamaundu echoed BAZ’s observation and reiterated the importance of mobile money because Zambia has low levels of financial inclusion and a high number of unbanked people.

“Mobile money services are tapping into the unbanked population and as a result play a complementary role with traditional banks. For instance, cash can now easily be transferred from a bank account to a mobile money account with ease,” Haamaundu stated.

In view of the global outbreak of the COVID-19 pandemic, most businesses in Zambia have been crippled. MNOs have stepped in to provide the Zambian business sector with digital transaction solutions in light of the negative impact of the coronavirus pandemic.