How People Pay P2B Payments
Mobile
money
And its potential to enable
digital commerce in Africa
Mobile money is another prominent mobile-based payment method. Initially designed for person-to-person (P2P) transactions, it has steadily gained traction for various financial uses –and is now slowly moving to online commerce.
This alternative payment method is dominant in many African countries, where cash remains the primary medium for transactions, and credit card penetration is as low as 3%. Since its launch nearly two decades ago, mobile money has significantly shaped the region’s economy.
It is especially ubiquitous in Africa. According to GSMA data, in 2023, the continent accounted for approximately 65% of mobile money volume globally, with 856 million registered accounts. About a third of adults in the region own a mobile money account, with penetration rates as high as 75% in Kenya and 60% in Ghana, per local authorities.
33%
of adults in Sub-Saharan Africa own a mobile money account, with penetration going as high as 75% in Kenya and 60% in Ghana
While P2P transfers are still the primary use case in the region, with transactions totaling USD 2.4 billion in a month alone, new regulations and the arrival of new players are playing important roles in shaping mobile money products – including merchant payments.
The latest GSMA report on the state of mobile money highlights that, in 2019, only one in every ten dollars circulating in the mobile money ecosystem was spent on merchant payments. By 2023, this figure had doubled, with two in every ten dollars being used for such transactions.
20%
of mobile money spending is made on merchant payments
“This marks a shift in user behavior away from the basic transactions that popularized mobile money in its infancy towards payments for goods and services," states the GSMA report.
According to GSMA, merchant payments grew by 14% in 2023, reaching nearly USD 74 billion. Additionally, the number of transactions per active account has steadily increased each year since 2019.
The baby steps of mobile money
in digital commerce
Despite their dominance of the payment landscape in Sub-Saharan Africa, mobile money is still taking baby steps in online purchases. According to GSMA, in-store payments continue to dominate merchant payments due to the limited e-commerce capabilities of most players, such as recurring capabilities and even a tailored user experience for the online journey.
“Mobile money players have established a basic infrastructure for one-time payments in online commerce, but most of their revenue still comes from transactional fees for in-person payments," explains Wiza Jalakasi, Director of Africa Market Expansion at EBANX.
Indeed, according to PCMI, mobile money only represents a significant share of digital commerce in Kenya, where it accounts for 48% of all online transactions. And even so, most of them are done upon delivery, not at the website checkout. In other African markets, its market share is still expanding, reaching 14% in Nigeria.
Eduardo de Abreu, Vice President of Product at EBANX, has the following perspective on the topic: “There are two different things when it comes to e-commerce payments: what is easy and what is big. Currently, mobile money is not easy to integrate, but it is big.” According to him, once the industry develops the right capabilities and integration to checkout processes, just like EBANX is doing, their online volume will boom, fostering digital commerce itself in the region.
Online merchant payments are already slowly growing within the system. According to GSMA, the average value of online merchant payments increased by nearly a third between September 2022 and June 2023. Over the same period, the number of merchants actively using the platform each month rose by 20%.
Cards as potential enablers for mobile money in e-commerce. Jalakasi also notes that international card players like Visa and Mastercard are leveraging mobile money reach in Africa by partnering with top mobile money players and launching both physical and virtual cards –which are now being used for online purchases.
The GSMA report highlighted this trend, pointing out that collaborations between mobile money providers and formal financial institutions have been instrumental in expanding access to other financial services, further blending traditional and digital financial ecosystems.
Some of those cards are already being used in online merchants such as Spotify and Netflix. "A lot of M-PESA customers today don’t have bank accounts. [The virtual card] is a catalyst for e-commerce and digital payments,” said Visa's Alex McCrea, during a launch for Visa's and M-PESA virtual card, in 2022.
