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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.

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.

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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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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