Africa is well known for its ascendancy in the newest form of electronic payments, and during the last few years we have seen a rise in mobile banking services. Fast growing economies with limited access to formal banking services undergo greater financial exclusion, yet mobile technology offers fast, cheap money transfer services and at the same time facilitates transaction. With the explosion in mobile phone technology in Africa, the appetite for mobile banking evolved among the Africans.
The majority of the population of Africa has no access to the banking services, with only 20% of African families are banked. For instance, in Kenya only about 30 % of household has bank accounts. Deficient Infrastructure, physical geographical isolation or inaccessibility and financial illiteracy are the main factors causing an impact on the accessibility of financial services in Africa. All these, culminate into exceedingly high cost of providing banking services. Statistics shows that Ethiopia, Uganda and Tanzania, each one has less than one bank branch per every 100,000 people. This ratio however shows a high disparity across the African continent, with Namibia having more than four, Zimbabwe more than three and Botswana nearly four bank branches per 100,000 people.
Banks are recognizing the potential of reaching out millions of prospective customers, especially the rural population who account for more than 60% of Africa’s total population and have limited access to banking services. Commercial bank branch network in the rural areas is still underdeveloped. However, according to the Global Findex report, more than 50% of the adult population in Africa has access to mobile telephone, and thus, mobile banking could enable the rural population to have access to financial services.
The case of Tanzania
The demand for financial services in Tanzania is increasing rapidly. Despite this country has 41 commercial banks, 3 financial institutions, 12 community banks, 4 microfinance banks, 2 private credit institutions and 3 financial leasing organizations, however, the quality of these banks, thereby the services that they offer, is far lower than the high quality offered in Europe. In addition, only a small segment of the Tanzanian Population has a bank account and only 2% of the total population has access to an active traditional bank account in September 2018. Nevertheless, in the period from 2006-2017, the percentage of people having access to some kind of financial services increased from 11% to approximately 65 %. This massive change is mainly due to the mobile transaction service M-Pesa which was introduced in 2008 by Vodacom, a major telecom company.
This sudden growth is not uncommon, as the market for mobile payment services is growing speedily worldwide. According to the Bank of Tanzania’s Monetary Policy Statement, Tanzania has surpassed Kenya in a relative amount of the population using mobile money accounts. As such, Tanzania is now considered as one of the world leaders in mobile money transfers. For instance, during the period of July 2017 to April 2018, the operation of mobile money services had an increase of 104.7% in volume and 78.9% in value compared between 2016 and 2017.
Since mobile money comes with big opportunities, as well as risks, the question arises whether the consequences for traditional banks are positive or negative with this change. Nevertheless, as the reach of mobile money is growing in a faster space, not only in Tanzania but across the whole African continent, banking institutions are currently facing numerous challenges that are coming with the rise of mobile payments. Hence, to keep up the new trend, traditional banks need to strengthen their position in the mobile payment sector and defend their market share.
Partnering with NanoBNK
NanoBNK partner with Banks in delivering Digital Transformation and omnichannel presence through its Digital Banking Solution: Internet Banking, Mobile Banking, Agency Banking and Kiosk Banking.
Our business model is unique whereby we take care of the Technology, Onboarding and Engagement of the Financially excluded and the local banking partner assists with regulatory issues, capital provision and marketing.