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Recently Mastercard launched a new solution called 'SME-in-a-box' that, among other things, allows small and micro-businesses across Africa to accept touchless payments. Of course, this is not an innovation as many companies and startups such as South Africa's YOCO, iKHOKHA, and UKheshe (to name but a few) have been offering similar solutions for some time now.

Some of them are partners with Mastercard.

The reason behind the growth of mobile money solutions in Africa is quite simple, the majority of Africans are "unbanked." As a result, many cannot participate in the formal economy.

Although not comprehensive, this image gives you an idea of the number of the main Fintech ventures that operate across Africa. Specifically the number of payments startups. With every year that passes, more startups emerge offering a different way that people can pay across the continent. Source: FT Partners Research

The rise of these mobile money solutions, as can be witnessed by the fact that over 50% of global mobile money payments occur in Africa, can simply be attributed to the unwillingness of legacy financial institutions to service this market of poorer Africans. This can be attributed to various reasons with one of them being that these institutions already have costs that means that it doesn't make sense to offer low-cost services to this market of consumers.

The other reason: they sometimes just don't understand this market and are stuck in their old ways.

For this newsletter, let us focus on the first reason.

It is not only that consumers in this target market are expensive to service by traditional banks and financial institutions, but it is also that they are among the general population's low-income earners. Every cent, penny counts to them. It works both ways. Consumers in this market also don't see any reason to pay a bank a certain amount every month just to operate a bank account, over and above transaction fees.

Enter mobile money solutions that have figured out that, by marketing their services as "financial inclusion" and scrapping the monthly account fee, they will attract more customers. And they have done this with some success.

However, how does this look like on the consumer side?

Taking the example of M-PESA, it doesn't look that good if you dig deeper. To summarise, if you are a low-income earner that uses M-PESA regularly to send lower amounts of money as compared to someone who uses it to send larger amounts of money, as a percentage, the one sending lower amounts (i.e. the unbanked, the bulk of the users) is paying more. This makes you question the mobile money industry as far as financial inclusion is concerned.

M-PESA transaction fees in Kenya. Source: Safaricom

I get it and agree with it, you have to make a profit, but don't market it as "financial inclusion." And then, there's is the other side, it appears, so far, that most payment technology companies end up becoming or offering loans. This makes sense, but it's a discussion for another day.

Giving poor people more payment options doesn't solve their problem of lack of money. In some cases it makes it worse due to some of the fees some of the Fintech services charge, which are more expensive than handling physical cash.

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Mastercard's new solution allows small businesses to accept touchless payments

The ongoing coronavirus disease 2019 (COVID-19) pandemic has forced many businesses, including smaller ones, to look at alternative methods of accepting payments. Given the way that the virus spreads, human contact needs to be kept at a minimum, and this includes the handling of physical cash. As such, and not surprisingly, Mastercard has announced a new solution that allows small businesses across Africa to accept touchless payments on their smartphones at no additional hardware costs. [Article]

Connecting Africa to the Internet

Kojo Boakye, Africa Director of Public Policy at Facebook joins us to share more information on Facebook's connectivity infrastructure projects and partnerships across Africa. One such project and partnership is the upcoming 2Africa subsea fiber cable. It is a result of a partnership that Facebook is part of and it will bring to Africa more Internet connectivity capacity than the continent currently has. This is good progress because as we continue to observe when Internet connectivity is introduced to communities, more economic opportunities become available. [Podcast]

Cameroon soon to accept customs duties payments via mobile money

Cameroon is planning to begin accepting the payment of customs duties and other related taxes via mobile money services. This recommendation has been made by President Paul Biya himself as the central African nations continue its drive towards full digitization. In a circular letter issued last month which gives orientation on how Cameroon’s 2021 state budget should be prepared, the 87-year-old President also asked the government to prepare a budget that prioritizes the digital economy through the putting in place of more telecommunications network infrastructure - the objective being to ensure progress towards achieving emergence through structural transformation of the country’s economy. [Article]

I'm stronger than a cupcake

Nazreen Sekao Pandor explains the power of affirmations and how you can use them correctly to transform yourself in this episode of the Brilliant But Broke podcast. This could be transforming anything in your life like your health, finances, spirituality, and relationships. [Podcast]

Content creators are turning to new ways to connect with their fans

Many content creators, curators, musicians, artists, and influencers have invested in new ways to adapt to this new reality by leveraging technology to capture high-quality shareable content for their fans on social media channels and platforms via podcasting and vlogging. [Press Release]

Quote of the day

Giving poor people more payment options doesn't solve their problem of lack of money. In some cases, it makes it worse due to some of the fees some of the Fintech services charge. (Tweet this)

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