Brazil’s fintech behemoth seek M-PESA moment in Africa’s vibrant mobile money industry

Seth Onyango, bird story agency

Ebanx’s foray into Africa adds to the growing list of foreign firms that are keen to establish a foothold in the continent’s multi-billion dollar mobile sector.

Growing smartphone use, expanding internet connections and demand for contactless transactions are fuelling investments in the continent’s financial and telecommunications industries.

Ebanx will provide local payment solutions in South Africa, Kenya, and Nigeria, bringing its total global operations to 18 states. <script src=”https://bird.africanofilter.org/hits/counter.js” id=”bird-counter” data-counter=”https://bird.africanofilter.org/hits/story?id=6322f1013bdde0063235db0e&slug=brazil-s-fintech-behemoth-seek-m-pesa-moment-in-africa-s-vibrant-mobile-money-industry” type=”text/javascript” async=”async”></script> For the Brazilian firm, Africa is the “next frontier”; one that is poised for rapid digital transformation.

“This is the moment for Africa, and it’s quite reminiscent of the Latin American landscape back in 2012 when Ebanx first began its journey by providing global merchants access to sell more goods and digital services via the internet to Latin Americans through local payment methods,” said João Del Valle, CEO and co-founder of Ebanx.

“Africa’s fast-growing digital economy is only in its early days, and it’s projected to grow up and to the right for the next few decades. Together with local players, Ebanx will be a catalyst to realize the many benefits of a digital economy even faster.”

This comes slightly over a month after Umba Inc, a US-based digital bank operating a non-deposit-taking credit service, acquired a majority share of a Kenyan microfinance bank through subsidiary UMBA Technology Ltd.

Ebanx’s charm offensive in Africa comes after the value of Africa’s mobile money transactions rose 39 per cent to US$ 701.4 billion in 2021, from US$ 495 billion US dollars in 2020.

A 2021 GSMA report said registered mobile wallets in Africa topped 621 million, a 17 per cent increase from 2020, with over 184 million wallets in active use.

In the coming years, growth is expected to come from both long-established mobile money markets and markets where mobile money services are still nascent, especially in South Asia and African countries such as Nigeria, Ethiopia and Angola, according to the report.

“In 2021, as in past years, the vast majority of new active (30-day) accounts were added in Africa and Asia,” GSMA said in the report.

Approximately 144 mobile money providers operate in Africa, with companies such as M-Pesa, MoMo and Orange Money accounting for a significant share of the market.

M-Pesa, managed by Vodafone and Safaricom and operating in seven countries, has seen significant growth in recent years. The service attracted an additional 12 million users from 2017 to 2020, reaching 41.5 million users by 2020, according to Statista.

M-Pesa users made 12.2 billion transactions in 2020, generating 784 million US dollars in revenue for parent company Safaricom. MoMo – MTN Group’s mobile money offering – has enjoyed similar growth, reaching 35.1 million active customers in March 2020.

According to a June 2022 report released by Endeavor with contributions from McKinsey & Company, there’s currently a US$115 billion digital economy in Africa.

International Monetary Fund (IMF) estimates show Africa has more digital financial services users than any other region in the world, accounting for nearly half of the 700 million individual users globally.

Last year, telco operator MTN, signed a partnership deal with Flutterwave to enable businesses in Cameroon, Côte d’Ivoire, Rwanda, Uganda and Zambia to make cash transfers via MTN Mobile Money (MoMo).

“The expansion of telecoms across the African continent is central to driving economic growth and senior business executives clearly agree as they rank it well ahead of other major sectors of the economy,” says Micky Watkins, CEO of World Mobile.

“To a great extent, growth in telecoms spurs growth in other sectors as societies become more digital and technology-focused and that applies very much to financial services, healthcare, retail, and education.”

Africa is also expected to attract billions of dollars worth of investments into its data centre market on the back of the continent’s growing internet economy.

In 2011 the level of financial inclusion in Africa was just over 23 per cent and jumped to almost 43 per cent in 2017, buoyed by the growth of digital financial services. The figure is expected to be much higher today, while research by the International Finance (IFC) showed that Africa’s internet economy could grow 56 per cent t in gross merchandise value by 2025.

This will be fuelled by paperless retail transactions on the continent, which are expected to continue to rise in the post-pandemic era.

Projected growth in Africa’s telecommunications sector and by extension its internet economy could explain the startup funding “frenzy” through 2020, 2021 and the first half of 2022.

bird story agency