NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, December 19, 2014

MOBILE phones have been touted as the solution to banking for the poor in Africa, given that phone penetration is so high. However, some bankers warn it is not that simple.

At a recent banking conference in Sandton organised by The Economist, John Staley, chief officer of Equity Bank, one of the biggest banks in Kenya, said the success of M-Pesa in Kenya has not been replicated except in Zimbabwe and Bangladesh.

“There has been too much hype about mobile and what it is going to do in Africa. Yes, it is going to play a huge part, but I think in the short run don’t forget the card,” he said.

A bank card costs about $2, while a cellphone is about $10, meaning it is still more cost-effective to give customers cards. Card associations, such as Visa and MasterCard, have “come back very aggressively into this space”.

However, MTN group chief commercial officer of mobile operator Pieter Verkade said “cards will soon only be used for Christmas. Mobile money has two crucial elements: distribution and low costs. Both are very difficult for banks to replicate.”