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The rise of mobile banking in Africa

The concept of mobile banking has been around for over 10 years and its earliest implementation, called e-money, was launched in Japan in 2001.

Not surprisingly, it took a little longer for mobile banking (m-banking) to gain a foothold in Africa, but since it did, its rise has been meteoric. Africa’s entrance into this revolutionary advance in banking took its first giant leap in Kenya with the 2007 launch of Vodafone’s M-Pesa.

In its first financial year (2008), M-Pesa generated KES 370 million (R43 million) for Safaricom, its operator and Vodafone partner in Kenya. In 2010/11, it generated nearly KES 12 billion (R93 million) — not bad for business just in its fourth year of operation. Apart from Kenya, mobile banking has been launched in many other African countries, such as South Africa, Tanzania, Madagascar, Côte d’ Ivoire, Mali, Senegal, Niger and Egypt.

While the list of African countries that are embracing mobile banking is growing steadily, Kenya and South Africa are streets ahead in terms of market size and adoption, with an m-banking penetration rate of nearly 100% in both countries.

Why is m-banking becoming so popular?

The main reasons for the unprecedented growth and popularity of mobile banking in Africa are clear and simple. Accessibility is the main factor in favour of m-banking: the large distances consumers need to cover in rural areas to reach bricks-and-mortar bank branches with their slower legacy systems, ensured a persistently high percentage of unbanked people across the continent.

With over 100 million mobile phone users in Africa (35 million in South Africa and 15 million in Kenya), m-banking was always going to be a powerful alternative. And the mobile phone industry is still relatively small in comparison to Europe and the USA.

A recent study conducted by the Consultative Group to Assist the Poor (CGAP) showed that globally, m-banking is 19% cheaper when compared with traditional banks. Compared to informal options for money transfer, m-banking is as much as 54% cheaper. Technologically speaking, m-banking is also the safest, quickest and cheapest method of transferring money, for conducting both personal and business transactions. As with any new technology, especially a lucrative one such as m-banking, there are many risks inherent to this fledgling industry.

According to Simeon Coney, VP of Strategic Development, at AdaptiveMobile, these four areas are seen as the primary causes for concern among consumers:
SMS spam: 3% to 5% of all SMS traffic is spam. The content of these messages vary considerably, from those soliciting purchases to the extraction of information or money by a fake user.

Mobile viruses: There are over 400 mobile viruses in existence; some render devices useless, while others steal and send data stored on your device.

Malware: Malware targets consumers and corporations, often charging a one-off fee when a link is opened or responding to an email.

Rogue applications: While these are not an intended threat, poorly written applications can cause loss of time and productivity.

The only possible threat to banks and mobile operators appears to be the chance that terrorist organisations may use this fast and faceless method of money transfer to fund attacks around the world. Ultimately, the onus is on both users and operators to ensure the continued safety and success of the best thing to happen to banking since the ATM.

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