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How E-Wallets In Africa Are Expanding Into More Services

Alpaca Team
Alpaca Team

On average, mobile phone penetration across Africa is 80 percent. According to McKinsey, that’s twice the rate of banking penetration. It’s also one of the many reasons e-wallets (or digital wallets) have gained popularity across the continent.

The use of e-wallets in African nations has been steadily growing for years, thanks to the mobile money providers who serve the area. These providers enable users to deposit funds into virtual wallets that can then be used for payments, including peer-to-peer payments and bill payments. Approximately 144 mobile money providers operate in Sub-Saharan Africa, with M-Pesa, MoMo, and Orange Money being among the most popular.

Growing acceptance of e-wallets

Mobile money has been a major component of Africa’s financial services landscape for years. In 2019, 200 million users made 24.46 billion mobile money transactions in Sub-Saharan Africa and the Middle East and Northern Africa, accounting for 64.15% of all transactions made worldwide. And of the 690.1 billion U.S. dollars in mobile money transactions made in 2019, 456.3 billion U.S. dollars were exchanged in Sub-Saharan Africa.

Covid-19 further accelerated businesses’ acceptance of e-wallets for online and in-store payments. In 2020, the value of mobile money merchant payments grew by 43% and Africans exchanged $490 billion using mobile money providers.

But African consumers can do more than pay merchants and utility bills with e-wallets. E-wallets increasingly integrate with other apps to offer other products and services to customers.

‘Anchoring’ additional offerings

Africa’s largest mobile money service, M-Pesa, acts as an “anchor” for a mobile-based savings and loans product, M-Shwari, which was created by M-Pesa’s parent company Safaricom. M-Shwari is a lending app that determines the amount of instant credit to extend to borrowers based on their mobile money transaction history in M-Pesa. As soon as the amount is determined, funds are deposited directly into customers’ e-wallets.

Just as e-wallets make contactless payments possible for those without bank accounts, apps like M-Shwari make credit accessible to people with no banking history. And there’s a lot more than banking that’s possible with e-wallets. According to research firm Omdia, in some regions, digital wallets have evolved into ‘super apps,’ which have "diversified beyond money management into restaurant bookings, taxi hailing, food delivery, and even gaming."

For instance, M-Pesa updated its app to allow users to book bus or train tickets, purchase insurance, and buy tickets for various events with more offerings to be added in the future.

According to Omdia, with its expansion into “super” services, M-Pesa “is taking inspiration from Asia and is looking to emulate the success of WeChat and AliPay, which between them account for more than 90% of digital payments in China.” Expanding into more services will help M-Pesa capture more transactions and better serve African consumers.

Summing it Up

As e-wallets expand their service offerings and grow into super apps, a mix of features and capabilities tailored to the specificities of African markets will be key to success.

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Alpaca Team

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