Electronic payments have been a primary driver of economic growth in West Africa, with Ghana being considered as the fastest-growing mobile money markets in the continent. Mobile money trends indicate a greater than 45% increase in mobile money transactions in 2019. 

This is mainly because of the stable penetration rate of mobile phones in the region and a favorable regulatory environment for the industry established on the back of early infrastructure investments. Moreover, the launching of interoperable systems in the area has also helped ease the recognition of top mobile money providers in West Africa. 

It is also expected that the rapid adoption of mobile money services in West Africa is unlikely to slow down, especially with most businesses struggling due to lockdown measures as a result of COVID-19. As per Washington Post reports, use of mobile money grew close to 15% in March, with experts projecting it to become even more common as the pandemic continues. 

With social distancing policies seen as a crucial way to curb the spread of the outbreak, the use of a mobile money payment system can help minimize the need to exchange cash and close personal contact. Outlined in this article are the reasons COVID-19 will drive unprecedented growth in West Africa’s mobile money market.

1. Favorable Regulatory Environment

West Africa has suddenly become a force in Africa’s mobile money revolution thanks to a friendlier regulatory environment. While the impact of mobile money has been long evident in Ghana, favorable regulations within Nigeria and other West African countries have allowed the region to become more active in adopting cashless transactions. 

In 2018, Nigeria’s Central Bank issued mobile money licenses to telecom operators such as MTN to launch a mobile-money based initial public offering (IPO). Relaxed restrictions and a mobile boon in West Africa have resulted in a steady growth in the financial technology sector, with businesses attracting a wave of foreign investments. 

It can be recalled that the limitations of mobile phones and mobile money restrictions in Sierra Leone, Liberia, and other West African nations during the Ebola epidemic resulted in a continuous struggle of containing the outbreak. With many African countries surpassing cloud nine with regards to mobile penetration, it is more than likely that West Africans will continue using mobile payments systems for their financial transactions in the foreseeable future. 

2. Lower Transaction Fees

Another factor driving mobile money and economic growth in West Africa are low transaction fees. According to Reuters, the majority of mobile money companies across the region have abbreviated or forfeited transaction fees in the hopes of reducing person-to-person contact and potentially slowing the spread of the virus. 

Limiting in-person transactions has been the primary focus of the long-term COVID-19 response of West African governments. While this helps minimize people’s movements, enforcing it can be economically harmful, especially in a continent where close to 100% of jobs are informal. 

At present, Ghana and the West African Economic and Monetary Union (WAEMU) have favored making mobile money systems as one of the essentials for working from home companies in the hopes of containing the spread of the virus. Furthermore, using mobile money systems allow businesses to provide West African citizens a secure means of transfer and payment of goods at a lower cost while ensuring safe and private storage of funds. 

3. Reduced Barriers

Besides lower transaction fees, reduced barriers expected to steer the proliferation of mobile money payment systems in the region. Unlike Central African countries, mobile money arrived a little late in the West Region, mainly due to lack of trust and necessary documents, as well as low literacy and a strong preference for cash. 

Even though the COVID-19 pandemic has given West Africans an excellent reason to go digital, mobile money operators have also reduced barriers by making it easier for users to sign up for an account. More recently, the Central Bank of Ghana allowed every mobile phone subscriber to open an account and transfer more than $100 daily without the need for Know-Your-Customer (KYC) verification.

By reducing the barriers involving mobile money payment systems, organizations can also help weather the outbreak’s economic impact. Plus, a stern warning from the World Health Organization (WHO) about in-person cash exchanges will likely result in mobile money’s emergence as an alternative to fast-track business transactions.  

4. Truncated Poverty Rates

The mobile money payment system’s versatility is another critical trigger point that could leap mobile money forward in this crisis. Mobile money has been revered as a method for West African citizens excluded from the formal financial system to start a business, receive payments, and access services like loans or savings. 

Estimates suggest that Africa is home to the largest share of the globe’s unbanked population and has a massive amount of underbanked small and medium-sized enterprises (SMEs) and consumers. With the use of mobile payment systems, businesses can provide poor rural people, and other individuals with no bank account an avenue to prevent from falling into poverty by softening the impact of emergency expenses.

It is worth noting that Africa is home to more impoverished individuals than all other continents combined. Through the use of a mobile money payment system, individuals can get more financial help from a more extensive geographical and social network of friends during an emergency, thereby making ends meet during the COVID-19 crisis. 

5. Birth of New Policies

Perhaps the most significant contributor to the growth of the mobile money market in West Africa will likely be the launch of the first digital finance policy (DFS). Late last month, the government of Ghana launched the first DFS policy in the world in the hopes of supporting various measures taken to prevent the spread of COVID-19. 

As of May 21, Ghana has reported approximately 6,269 infections and 31 deaths, resulting in a massive blow to its gross domestic product (GDP) projections. Reports in Ghana suggested that GDP growth projections for 2020 were revised from 6.8% to 2.6% following the COVID-19 crisis. 

With 42% of West Africans still without a formal financial account, the birth of a DFS policy should result in a large number of individuals having access to financial services in the face of pandemic-related restrictions. On top of everything else, the policy also encourages actions to support financial technology innovation that could lead to a more favorable environment for e-commerce, remittance markets, and contactless utility and merchant payments. 

Spurring the Mobile Money Market

The COVID-19 pandemic will likely act as a catalyst for the high adoption of mobile money with West Africa experiencing an uptick in new transactions and accounts as a result of the reasons mentioned above. While implementation may take time in some West African countries, the adoption of mobile money payment systems is expected to bring a positive long-term outcome even after the pandemic while simultaneously forcing innovation. 

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