E-Wallets App Development 2020 is the year when we are about to witness a massive increase in the adoption of contactless payments worldwide. People were already shifting to mobile payment options and then the Covid-19 outbreak fueled the growth of the cashless society even more. Since more than one-fourth of the world is locked down, technology is the only option left for people to peak out and interact with each other.
However many of the African countries have started easing out the lockdowns but the guidelines for social distancing have remained intact. Many things have changed Africa during this lockdown period and one such is the behaviour of Africans while making a purchase. It came after the World Health Organization flagged cash money as a conduit for coronavirus spread.
Governments and many startups in the continent have started to implement technologies to shift a major portion of cash transactions to mobile money. In a similar fashion, to reduce the physical exchange of currency in Kenya, their largest telecom service provider, Safaricom, has recently offered a fee-waiver on M-Pesa. The company announced that all person-to-person (P2P) money transactions under 1,000 Kenyan Shillings (around $10) will be free for the next three months.
Mobile Payment is still in its infancy in Africa
Yes, you heard it right. In fact, the mobile payment makes up only 10% of all money transactions in Africa. No matter how bright the future of Mobile payment in African region looks, the required infrastructure will be a major hurdle.
Till the end of March 2020, the internet users in Africa accounted for 39.3% of the total population which is very small when compared to 62.9% for the rest of the world. The smartphone users in the African region are projected to increase to 66% by 2025. This statistic implicates that app-only mobile payment solutions will struggle in the African market. This is because the mobile payment solution is supposed to be accessible by everyone, even the unbanked population.
USSD enabled E-wallets are the best foot forward for the African Mobile Payment Market
Let’s talk about some more statistics. In Africa, there are a couple of mobile money service providers including Vodafone’s M-Pesa and MTN mobile money. Vodafone’s M-Pesa is the most widely used mobile payment solution in Africa with 37 million active customers. The M-Pesa service is available in 7 countries while MTN mobile money operates in 14 different African countries with a total of 30 million active users.
Thanks to such mobile money service providers, because in 2018, Africa’s share in mobile money activity around the world was 45.6%. That’s unbelievable, isn’t it? Especially considering only about 39% of the population has access to the internet. Well, here is the spoiler - Over 90% of the mobile money transactions in Sub-Saharan Africa are still driven by USSD, which means that the majority of mobile money users have feature phones.
Before you jump on asking what is USSD payment, let’s understand what USSD is.
What is USSD?
And most importantly, how does USSD relate to Mobile Money? USSD stands for Unstructured Supplementary Service Data. It is a protocol used by GSM networks to facilitate communication with a service provider’s platform. (Quite technical right? Don’t tune off, I’ve simplified it below)
The USSD technology works with all types of cellular phones that support GSM networks. It helps in carrying out transactions using shortcodes and doesn't require an internet connection. Well, almost all of the cell phones are GSM standard compliant as they require a SIM card to connect to a mobile network.
USSD is a real-time communication technology which can be accessed through a string that usually begins with an asterisk (*) and ending with a hash (#). This technology is session-based and unlike SMS, it doesn't store the data on the mobile phone. Almost all of the mobile operators use USSD to provide customers with services like top-ups, balance checks, and many such information. Apart from these services, mobile operators are extending their use of USSD by providing mobile money services. One such example is Vodafone's M-Pesa which utilizes Safaricom.
Moreover, Banks and some utility companies have also started leveraging USSD technology to provide seamless services to the customers.
What is USSD payment?
USSD payment is a mobile payment gateway that allows users to transfer funds from their bank account, without requiring them to physically visit the bank branch, ARM, or Kiosk. Not just money transfers, USSD payment technology allow users to pay bills, do mobile recharges, check bank balances, etc.
Why USSD for Mobile Money?
USSD is the key catalyst for expanding financial inclusion in the African region, as there are a huge number of low-income populations that have limited or no access to internet services. Money is the medium to access all the services, as there is no barter system available in the modern world.
To bank the unbanked - typically the rural poor, women, and displaced people - USSD is currently the most feasible option for their situation. It is hard to neglect the possibility of financial inclusion with USSD as we’ve seen the progress M-Pesa and MTN Group have made so far. In many African countries, most of the banks have mobile banking apps for their smartphone customers, but they also have a USSD option to cater to the customers having feature phones.
USSD enabled e-wallets will pave the way for a cashless Africa
At this moment, scaling mobile payments in the African region requires targeting to both the type of customers - smartphone customers and feature phone customers. There are also constraints such as lack of digital familiarity, which USSD enabled e-wallets app development can address. Because of the infrastructure unavailability, the mobile app-only e-wallets aren’t a feasible payment solution for Africans. The market requires mobile payment services that will address the need of the majority, the unbanked population.
Jermaine Trotman is the co-founder of Nimble AppGenie, a company renowned for its bespoke mobile app development and web development in e-wallet app development and fintech development.