Is mobile money beneficial for banks?

Over the past decade, mobile money adoption has seen exponential growth, particularly in sub-Saharan Africa where half a trillion dollars worth of deposits remain untapped, and 500 million people are still unbanked. This presents a significant opportunity for financial institutions to access informal markets in new ways. Vahid Monadjem, CEO of Nomanini, a company focused on financial inclusion, shared insights on how mobile money can be beneficial for banks and the challenges they face in integrating these systems effectively. Mobile money has traditionally been dominated by mobile operators, but banks are now exploring new strategies to collaborate with existing channels in order to expand their reach and drive financial inclusion further. One of the key challenges banks have faced when trying to implement mobile money systems is the lack of channel strength that mobile operators possess. As the first wave of financial inclusion by mobile money operators proved successful, banks attempted to replicate this success with limited success. However, a second generation of banks is now looking at alternative approaches, such as partnering with mobile money channels and FMCG distributors, to reach informal merchants and drive financial inclusion. Nomanini's focus on informal merchants has allowed them to build partnerships with existing networks and channels, enabling banks to access these markets and merchants effectively. Monadjem highlighted the importance of multi-stakeholder partnerships in driving the growth of mobile money in different markets. While the rate of growth may vary across regions, successful collaborations between banks, distribution companies, and mobile operators can lead to significant growth in transactions. By leveraging existing networks and channels, banks can tap into previously unbanked markets and drive financial inclusion on a larger scale. Interoperability emerged as a key theme in the discussion, with Monadjem likening it to the evolution of credit card systems. Just as credit card systems evolved to become interoperable, enabling consumers to use their cards across different banks and merchants, mobile money systems can benefit from a similar approach. By promoting interoperability, all players in the ecosystem stand to gain, with mobile operators benefiting from transaction income and banks earning interest on liquidity. While countries like South Africa and Kenya are leading the way in terms of financial inclusion and access, there are still untapped opportunities in markets like Mozambique, Zambia, and Cote d'Ivoire. Nomanini's focus on these 'white spaces' underscores the potential for growth and collaboration in challenging yet promising markets. By working together with banks, mobile operators, and distribution companies, Nomanini aims to drive financial inclusion and access to informal merchants in these markets. In conclusion, the collaboration between banks and mobile money players represents a new frontier for financial institutions in Africa. By leveraging existing channels and networks, banks can tap into informal markets and drive financial inclusion on a larger scale. With the right partnerships and strategies in place, the potential for growth and impact in previously underserved markets is vast.