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Mobile financial services in the Middle East and Africa: operators should aim to develop next-generation services

Enrique Velasco-Castillo Senior Analyst, Research

"Next-generation mobile financial services should be built from the ground up to facilitate interoperability, encourage third-party innovation, and quickly respond to customers' changing needs."

The success of operator-led mobile financial services (MFS) in the Middle East and Africa (MEA) has been mixed. In some Sub-Saharan African (SSA) countries, MFS have thrived. In Kenya, M-Pesa represents over a quarter of Safaricom's service revenue,1 while in Tanzania 34% of adults had active MFS accounts in 2015.2

However, the potential of MFS to bring financial inclusion to underbanked customers – while providing alternative revenue streams and service differentiation to operators – faces significant challenges.

  • M-Pesa's success can no longer be replicated: The conditions that enabled initiatives like M-Pesa to flourish in Kenya included the absence of regulatory barriers to operator-led mobile money services, the operator's market share lead, and a very clear use case (person-to-person (P2P) domestic transfers) to drive repeated use. Currently, regulation is an important barrier to entry for MFS in the region. Onerous licensing and capital requirements are now the norm, and regulation tends to favour financial institutions over operators.
  • Cash remains dominant: Operators must contend with a deeply ingrained cultural preference for cash and informal money (hawala) networks. In Egypt, 93% of transactions are cash-based, and electronic payments represented only 1.5% of household expenditure in 2014.3
  • Operators have failed in key and otherwise promising markets: In South Africa, Vodacom's M-Pesa shut down in May 2016, after only 0.002% of its 34.1 million subscribers became active users 6 years after the service's launch. In Nigeria, MTN experienced a 74% decline in MFS revenue in 2H 2015, and in September 2016 the operator stopped new customer sign-ups to its mobile money initiative in South Africa due to limited take-up.

Given these challenges, what can operators do to ensure the success of their mobile money initiatives in MEA? The following are some key insights from Analysys Mason's Digital Economy Readiness Index (DERI) 2017 reports for the Middle East and North Africa (MENA) and SSA (see Figure 1).

Figure 1: Highest-scoring initiatives in the DERI 2017, MENA and SSA [Source: Analysys Mason, 2017]





Readiness score








  • M-Pesa






  • Orange Money
  • Orange Money Web Payment






  • Tigo Cash
  • Tigo Pesa (Tanzania)






  • Fawry
  • Phone Cash






  • CashU






  • Flous Wallet (Egypt)
  • Etisalat Wallet (UAE)

Operators should focus on next-generation MFS instead of trying to replicate M-Pesa's success

Simple P2P payments ensured the success of operator's mobile money initiatives in Kenya and Tanzania, but may not be the most attractive use case for customers in other countries. To remain competitive, next-generation MFS must go beyond P2P payments and provide a superior user experience in terms of convenience, security, speed or rewards to displace cash. Service differentiation is essential for operators looking to stand apart from banks, for example through micro savings, credit, insurance, financing for education or healthcare, utility payments or m-commerce.

In cash-centric countries, next-generation MFS should be designed first to assist people's transition from cash to digital payments, gradually introducing a wider range of digital facilities as customers become familiar with their usage. This includes:

  • developing large agent networks where customers can perform every-day transactions like bill payments and money transfers
  • streamlining user registration and ensuring that customers are trained to use the service immediately after registration
  • ensuring regular usage by providing loyalty incentives (for example airtime).

Next-generation MFS are predicated upon platform business models

Next-generation MFS must be conceived differently. Options include APIs or marketplaces open to third parties, which reduce the risk that operators face as developers and other companies carry the cost of MFS service development. Open APIs also reduce the potential for regulatory scrutiny by facilitating interoperability, and allow operators to rapidly deploy fintech innovation should they decide to absorb services from start-ups. Mobile money APIs can also facilitate the coupling of consumer-facing mobile wallets with online payment gateways for Internet merchants. This helps operators to position themselves as part of MEA's nascent ecommerce value chain.

Front-end user experience is also important. Extensive usability and localisation testing must be conducted to ensure that the interface language is clear, and that users quickly find their way to the actions that they want to perform. This is especially important in MEA, because many countries are multi-lingual and have varying degrees of literacy within the population.

Operators may need to partner with (or acquire) mobile money providers

In some countries, operators may realise that it makes strategic sense to become financial institutions themselves if they hope to derive substantial revenue from MFS. To achieve that, operators may need to invest heavily in acquiring financial services capabilities to compete with banks. Investment in mobile banking capabilities is particularly important in countries with high banking penetration (like South Africa), because retail banks are moving more of their customer points of contact to online and mobile channels, and reducing the number of physical branches that are necessary to support them.4

1 Source: Safaricom Limited Annual Report 2016. Available at

2 Source: New Data Finds Mobile Money "On the Cusp" in Rwanda and Ghana, Claudia McKay, CGAP (Consultative Group to Assist the Poor), December 2015. Available at

3 See Spotlight on Egypt. MasterCard Advisors, September 2013. Available at

4 For discussion on how operators in Europe and emerging Asia–Pacific are investing in becoming banks, see Analysys Mason's Digital Economy Readiness Index: digital payments in Europe and North America and Digital Economy Readiness Index: digital payments in emerging Asia–Pacific.