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The pitfalls of operating a mobile money business in Africa.

Africa is a continent of emerging economies, with Nigeria, Egypt and South Africa leading the charge. However, in this developing continent, Mobile Payments have become the first choice for most Africans. The mobile payment landscape has made strides but unlike its Chinese counterparts such as Alipay and WeChat, most mobile payment applications in Africa are still focused on “Mobile Money” which relies on MNOs (Mobile Network Operator) for users to transfer money to their loved ones or friends within the MNO network.

When we talk about best practices for mobile money in Africa, Safaricom in Kenya, Vodacom in Tanzania, or Econet in Zimbabwe come to mind. These organisations have achieved success and in most cases, were early adopters of this application. However, a closer look reveals inherent advantages and disadvantages that are difficult to overcome. Today, I will share my personal opinion on the challenges that African MNOs have to contend with.

The switching syndrome

Did you know that the original purpose of a mobile money application was not to make money? This is contrary to what most of us know about this type of business. In fact, most network operators launched their offering to prevent users from switching to a competitor. The African consumer is price sensitive and can easily change their mobile number to another MNO if a competitor has discounts or promotions. Keeping users interested and their mobile number actively connected is the goal that African MNOs are constantly pursuing.

When Safaricom innovated this business in 2007, it was certain that mobile money would reduce the number of users leaving the network and they decided to launch this offering. A race for customer retention ensued as other network operators realised the game was changing. As a result, the purpose of mobile money became unclear and operationally they did not have an innovation pipeline and the product became uncompetitive in some places and in others, a parity market emerged.

The glass ceiling syndrome

There are finite customers to go around for MNOs and customer threshold poses a challenge for any operator to expand their services. This threshold is defined by the number of mobile users on the network. If an operator has 20% market share, then they will only service 20% no matter how hard they work. Of course, channels play a critical role such as offering a customer centric mobile money app to promote the service but if your mobile money service is better than the competition, you may be used by customers as a backup number. We hardly see cases where a small MNO overtakes larger MNOs with a good mobile money app.

Drawbacks of organisational structures and processes

Mobile money delivery models are similar to an SMS or VAS service and in most countries we still see this traditional type of procurement and delivery process but little innovation. This is not to say its incorrect but in the internet age where ultra-convenience is the new normal, this multi-level operational structure cannot keep up with the pace of change. In China we say it’s easy to turn a small boat but quite a feat to turn a large ship. This analogy can be applied to large mobile networks whom, at times, are at the mercy of their own processes and hierarchical structures that inhibit the ability to be agile and innovate quickly. These process are unnecessarily long and leave room for agile internet businesses that operate outside of archaic traditional operating models to carve a unique position in the market.  Foresighted MNOs will actively consider separating the mobile money team from its core business to minimize internal losses and quickly adapt to market changes.

To win in the market, a real mobile payment application should be designed around and for the user. A mobile payment app that allows a user to transfer funds across mobile networks and even across borders is what the African market needs. Econet in Zimbabwe is one these MNOs that has this foresight. The organisation launched Sasai, a social payment application in 2018. Through Sasai, users are able to transfer money between each other and can also unload and load money from and to their mobile money account. After three years of development, Sasai is now an All-in-one Super App. An eco-system has been established with SasaiPay at the centre. Users are able to communicate with their mobile contacts on Sasai and share beautiful moments with each other and still pay merchants, service bills, watch videos and livestream movies, sports and so on. 

I’m proud to have been part of the team that designed and built Sasai for the African audience. I believe a good mobile payment app that gives users the ability to perform multiple tasks will help any mobile operator to win and in the process, add to Africa’s growth story.

In this article I have outlined my personal opinions. They may not be 100% correct as things change every day but what is true is that a cross network, cross border mobile payment solution is the right direction to shift innovation and dismantle outdated approaches to servicing a dynamic market.

Yichang Yan is a Mobile Payment, Blockchain, and IOT expert based in Guangzhou, China. He has worked with technology companies in Africa and understands what it takes to harness the power of technology and enhance customer experience in emerging markets.  

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