If you are reading this blog post on a mobile device while sipping a latte purchased with a mobile wallet from the likes of Apple and Samsung*, you may view yourself as something of a trendsetter — and with some justification.
According to a recent study by First Annapolis, while two out of three U.S. smartphone users have made a mobile payment in the past 12 months, only one out of 20 use it once a week or more. Similar modest adoption rates have been reported in other developed markets.
Before you start to feel too smug, however, consider the fact that for millions of consumers in Africa, mobile wallets are nothing new — they’ve been around for a decade already. For most of them, a mobile wallet isn’t just a convenient way to jump the queue at the coffee shop. It is their only alternative to cash or barter, the way they pay for goods and services, how they receive — or pay — wages, and how they send money to relatives abroad.
The sheer scale of mobile payments in countries like Kenya and Nigeria became clear at the World African Forum held in May in Durban, South Africa. Deloitte*, in partnership with Mastercard*, hosted a panel discussion on the potential of digital technology to promote financial inclusion in Africa.
A joint report from the two companies, released to coincide with the WEF event, reveals the financial services industry’s potential — particularly for products tailored to the needs of the low-income segment at the base of the pyramid (BoP) —remains largely untapped. Half of South Africa’s workforce falls into the BoP income bracket, with this share likely to be much higher in the rest of the African continent.
The report identifies three waves of digital innovation in financial services.
The first wave involved fintech companies disrupting the banking sector by developing digital banking and payment solutions, started mainly in collaboration with telecommunication companies. The most well-known example is Safaricom’s mobile wallet, m-Pesa, which is now in 10 countries and has a customer base of approximately 30 million active users.
Following in the footsteps of fintech companies, “insurtech” companies have started to shake up the insurance market in a second wave of disruption by leveraging some of the technologies from the first wave, such as mobile payments systems, to develop insurance products targeted at the BoP.
By adopting innovative approaches to risk assessment, distribution, payments, administration and product design, these insurtech companies can achieve the scale required to service the low-income mass market.
The report cites the fascinating example of Sweden-based BIMA, which offers insurance coverage of up to $1100 for as little as $0.30 via mobile technology to approximately 24 million BoP consumers in four African, eight Asian-Pacific and four Latin American markets.
These pioneers have paved the way for a third wave of digital innovation.
“Going forward we expect digital disruption to gain further momentum and to lead to exciting new business models in an increasingly converging industry,” predicts the report. “A glimpse into the future shows that platform companies will emerge as key industry players creating marketplaces for a host of financial services and blurring the lines between financial services and technology providers.”
As Apple, Samsung and others ponder strategies to accelerate adoption of their digital wallets in developed markets, they could do worse than to cast their eyes towards Africa, where mobile payments are well established and are acting as a springboard for further innovations that promise to transform the fortunes of tens of millions of people.
Craig Atherfold is group account director, Edelman South Africa