The fact that the mobile money industry now processes more than 1 trillion dollars on an annual basis is well and truly remarkable. But let’s be clear: this is not the profit being pocketed by providers, but rather the total value of all flows to and from people and businesses using mobile money platforms.
The figure is nevertheless testament to what an important economic role mobile money plays in low- and middle-income countries. Through mobile money, significant parts of the developing world have been able to digitise, simplify everyday life, and access international financial channels.
Let’s be blunt. You should ignore the total number of registered accounts. What really matters is the number of accounts that are active on a 30- and 90-day basis. And if you want to talk about deeper financial inclusion, 30-day active accounts are all you should focus on. Why?
First, as KYC for SIM cards continue to improve, mobile money providers are increasingly likely to auto-register telco customers for mobile money – often due to pressure from regulators.
Second, registered accounts data is also vulnerable to ‘ballooning’, as some providers do not clean their databases regularly. To make the problem worse there is often subsequent culling of dormant accounts – causing perceived - but not real - fluctuations.
These two factors, together with the prevalence of multiple-SIM ownership in many low- or middle-income economies, means that, the total number of registered accounts is of diminishing importance.
What matters is that there are now more than half a billion (518m) active 90-day accounts, of which 346m are active monthly. These are people who employ mobile money in their everyday financial lives, often across multiple use cases. As a measure of the extent to which mobile money is penetrating economies and societies, this is the most important.
Perhaps more interesting - and certainly more portentous - than the facts above, is the way usage of mobile money is changing. For example, this year the industry made significant gains in a use case which has often been seen as the “holy grail” of mobile money: merchant payments.
The total value of mobile money transactions made from consumers to merchants reached $66 billion in 2021, up an enormous 94% year on year. There are a few factors behind this increase.
First, During the COVID-19 pandemic, many governments encouraged contactless payments so as to limit physical contact.
Second, more and more providers choose to not charge merchants for transactions in order to further popularise the use case, meaning that more small businesses are moving from the P2P channel to formal merchant payments.
Lastly, availability, the number of physical and online businesses actively accepting mobile money payments continues to increase rapidly (~47% up in less than a year).
In years to come, we would expect to see the average value per merchant transaction continue to drop, as mobile money increasingly gets used for smaller and smaller purchases. In the report, a parallel is drawn with the nature of card purchases in developed markets over the last 20-30 years, which have steadily decreased in average value while shooting up in volume.
There is much hype in the world of fintech these days, with a lot of fawning over app-led, data-guzzling solutions targeting tech-savvy African urbanites. However, with its physical presence in mom-and-pop shops across the developing world, mobile money remains truly unique in terms of reach and inclusivity across the social spectrum. For example, despite Nigeria’s booming fintech scene, the central bank just the other day found it necessary to finally allow telco-led mobile money providers to enter the market, despite years of resistance to doing so.
So, with agent networks still growing at break-neck speeds (up 25% YoY) in well-established markets, mobile money is unlikely to go anywhere anytime soon – and poorer people across the world will be better off for it.