Money moves the world. For millennia we have used it to buy the food we eat, the clothes we wear, and other goods and services we enjoy daily. In the over 2,700 years, money has evolved from bartering to physical coins and notes to mobile payments. Though the adoption of digital currencies and payments has only really taken off in the last few years, some of the technology behind it has been around for closer to a quarter of a century. Today, these technologies have paved the way for mobile money, which is not only facilitating payments across the globe but also fostering financial inclusion for many previously unbanked populations.
What is Mobile Money and How Does It Work?
The groundwork for today’s mobile money technology was laid back in the early 2000s, when a patent for a mobile payment system was filed. The idea behind the technology has remained largely the same, as one of the patent’s objectives was to provide a mobile payment system with which users could choose to settle a payment via Wireless Application Protocol (WAP) phones.
However, the technology behind mobile phones has changed dramatically. That comes as no surprise, given that the mere concept of a smartphone was unthinkable back when the mobile money payment system patent was filed. The smartphone has allowed mobile money to reach new heights, greatly improving the lives of many, especially those living in rural areas.
So, mobile money is a service that allows the user to do basic financial transactions via mobile phones without the need for a bank account. This is different to mobile banking, which is when banks allow customers to manage their accounts via a mobile app.
Mobile money has seen a huge surge in users since 2010, with seemingly relentless growth. This uptick is mainly down to the rise of mobile phones and the Internet. Moreover, mobile money accounts have done particularly well in regions with limited banking infrastructure thanks to eKYC identification options which allow users to open accounts using just a phone number.
Mobile Money: Adoption Trends and Positive Impact
The positive impact of mobile money cannot be overstated or overlooked. As well as improving financial inclusion and enabling certain digital services, mobile money has the potential to have a significant effect on a country’s GDP, according to the GSMA’s latest State of the Industry Report (SOTIR).
For instance, the total GDP of countries with a functioning mobile money service was $600bn higher than without mobile money, according to the report’s data collected between 2013 and 2022. That’s the equivalent to a 1.5% rise in GDP.
By diving deeper into the specifics, you can understand why mobile money is referred to as an “African success story” in the report. Mobile money has overwhelmingly had the highest level of adoption in Sub-Saharan Africa, adding up to nearly three quarters of the world’s accounts. Well over $150bn has been added to the GDP of many countries in the region. At the same time, the adoption of mobile money has increased GDPs in Eastern Africa and Western Africa by 5.9% and 4.1%, respectively.
On the global stage, the report states that the adoption of mobile money has been relentless, with the number of registered accounts growing to 1.75 billion in 2023. In the same year there were around 435 million active mobile money accounts, which is a 9% annual increase, albeit it’s a slower growth rate compared to previous years.
Mobile money users are also having a direct impact on remittances and payments. The SOTIR’s data on transaction values in the instance of international remittances increased to $29bn, one third higher than in 2022. As for merchant payments, its use case also grew by 14%, reaching $74bn. Currently, two out of every ten dollars are now being spent on merchant payments to acquire goods and services, while the remaining 8 dollars is sent between two people.
Beyond Consumers: Economic Contributions of Mobile Money
As such, it’s no surprise that retailers are doing everything they can to meet the demands of the consumers now using mobile money to buy even the most basic of needs. It’s a method that is both efficient and convenient: nothing is as easy as pulling out your phone and purchasing something.
There are many reasons as to why the adoption of mobile money by businesses, small and large, is the best option to accommodate customers. Primarily, customer experience is greatly enhanced, as mobile payments offer unbeatable comfort and speed when it comes to reaching the checkout. For instance, simply tapping your phone to pay improves efficiency and reduces waiting times.
Said efficiency is also key for the business in question. Mobile payments can help alleviate waiting times during peak hours, streamlining the entire process for both customers and retailers, as well as making it a secure process.
As the retail industry evolves, it has begun to integrate transaction data into their insights, getting a peek into their customers’ purchasing habits, behaviors or preferences. This way, they can make more careful and thoughtful decisions about their products and how they market them.
Moreover, businesses will also have the chance to integrate their services into a potential omnichannel strategy, wherein mobile payment methods are the foundations of the online and offline shopping experience. With it, customers can mix and match their purchasing decisions, ensuring a level of flexibility not previously possible.
Future financial expansion and bridging the gaps
It comes as no surprise that younger generations are leading the way in terms of mobile money usage and mobile banking. In a survey conducted in 2021, it was found that almost 85% of Gen Zs and over 81% of Millennials had used a mobile wallet for payment, signaling that this user base, which is already massive, is only set to grow.
Further, these two age groups are the biggest players in the digital banking game thanks to its convenience. Some 99% of Gen Z and 98% of Millennials use digital bank apps to view their money, check their credit score or even deposit a check.
But despite the great strides made in recent years to offer mobile money users these widespread, easy-to-use tools, there are still gaps that need to be closed, especially in regions such as sub-Saharan Africa where mobile money is growing the most.
According to GSMA, AI has “the potential to expand access to mobile money services improving access to financial services”, which would inevitably lead to socio-economic benefits for society and the global economy. There are drawbacks that the mobile money industry needs to tackle, namely a lack of clear regulations and rules as well as a shortage of skilled workers in this area, but the potential for closing the gaps exists.
Mobile Money and Financial Services: Money Transfers, Challenges and Opportunities
Another example of how mobile money is helping to make finances more accessible is the initiative by Bank of Ethiopia. This institution partnered with a local fintech company to offer users the chance to have their loans approved more quickly through AI-powered forms, thus allowing previously marginalized people to pursue previously unattainable investments or weave through a financial emergency.
There have been other cases in which countries have recognized the power and potential that mobile money can have for its citizens, with many of them favoring the creation of new laws and systems to aid the adoption of this type of service.
Notable mentions include Pakistan, who in 2021 introduced the Raast Instant Payment System to significantly enhance the usability and adoption of mobile money; the Philippines, where their central bank implemented a retail payment system in 2017; and Nigeria’s instant payment system set up following more than a decade of updates to their mobile money and money transfer services.
In conclusion, since the idea of mobile money was introduced back at the start of the century, it has revolutionized the financial landscape by offering unprecedented convenience and accessibility, facilitated day-to-day transactions and has empowered businesses to enhance customer experience while streamlining their operations.
Though the rapid adoption of mobile money in regions with limited banking infrastructure has been a huge positive, in great part thanks to its contribution to economic growth, challenges still remain to bring everyone from all over the world onto a level playing field, and only by addressing the issues can the full benefits of mobile money be maximized.
At Ria we take pride in using the power of mobile money to provide safe, fast and convenient money transactions. By smoothly integrating with mobile payment platforms, Ria allows users to easily send and receive money, no matter the distance.
Have you been thinking about sending money to family and loved ones back home? Then make sure to download the Ria app.
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About the author
Shay Conaghan
Your friendly neighbourhood Content writer. Scottish-Spanish, or something along those lines.
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