Ongolo Proud African

Is mobile money replacing or enabling cash?

17 September 2020

In March 2020, the World Health Organisation (WHO) was forced to deny a report that handling of cash could help to spread COVID-19. The health concerns were valid given the velocity of money. It is estimated that smaller bills change hands every 3 days in the United States where 31% of retail transactions are paid for in cash. Even before COVID-19, it was found that most US bills were contaminated with 3,000 different types of bacteria.

Zimbabwean flag
Zimbabwean flag
The Zim Dollar
The Zim Dollar (ZWD) replaced the Rhodesian Dollar in 1980 and was the official currency until 2009 when other currencies were used. It was demonetised in 2015 and reinstated in a new form in 2019.

What is becoming apparent is that COVID-19 has presented Africa with an opportunity to push the digital payment agenda and reduce the reliance on cash.

The case against cash

There are three reasons not to use cash at the individual level. First, it is unsafe to carry around large sums of money or to keep money in your home. This was one of the key drivers for the growth of digital payments in South Africa where muggings are high. Secondly, Central Banks are making it increasingly difficult to make large transactions in cash by limiting the amount that one can withdraw or deposit over the counter. Lastly, the optics of using cash are not good. Handling big sums of cash triggers some suspicion that the money was illegally obtained or from undeclared income. Why use cash if you have nothing to hide?

For companies, the main driver for moving away from cash is that it is costly to handle. Companies need to invest in security to protect the money and then pay for Cash in Transit services to move the money to a bank. These companies put themselves at the risk of fraud or theft from insiders. It is not uncommon to see retailers in the West refusing to take cash. It simply adds to the cost of doing business.

South African flag
South African flag
The South African Rand
The South African Rand (ZAR) was introduced in February 1961 and is named for the gold-rich Witswatersrand hill on which Johannesburg was built. The Rand is legal tender in South Africa, Eswatini, Lesotho and Namibia, even though other countries have their own currencies

The prevalence of cash is a sign that the black economy is thriving and also supports bribery and corruption. In Zambia, unofficial estimates are that nearly 80% of transactions take place in the black economy, which makes it difficult for the government to understand financial flows and grow its domestic revenue base. As a global recession looms and more African countries see their credit ratings cut to junk, increasing domestic revenue will become paramount.

Cash is also correlated with low savings in an economy. The Global Findex data shows that the formal savings rate in Africa is low. More money is held in mattresses than in banks. Informal means of saving include buying assets such land, cattle and jewellery. Assets are a great alternative but have two limitations. Firstly, property rights are still developing in Africa with most land being customary and not on title. Secondly, the insurance industry is also nascent offering providing little protection in the event of theft or damage to those assets. The lack of formal savings in an economy limits the ability of the financial sector to lend and is stunts economic growth.

Nigerian flag
Nigerian flag
The Naira
The Naira (NGN) was introduced in January 1973 and replaced the Nigerian Pound. The Naira has multiple exchange rates from official to black market and even a rate for religious pilgrims heading to Mecca

The digital options to replace cash

Mobile money

Two African countries have achieved a high success rate in the use of mobile money. Kenya was the birthplace of mobile money so it is unsurprising that 73% of Kenyans have mobile payment accounts. M-Pesa was created by Safaricom in 2007 to manage microloans from the UK Department For International Development (DFID) and gained traction during the 2008 political violence, when it was only means to send and receive money.

Zimbabwe is another country that was forced to go digital after being crippled by a lack of physical money. EcoCash is the mobile payment solution backed by the billionaire owner of Econet, Strive Masiyiwa. By 2017, EcoCash had 6.7m registered users, 27,000 merchants and had facilitated over $23bn in transactions.

“Mobile money has been touted as the solution to bringing the unbanked into the financial system, but we should take a step back and objectively evaluate what has been delivered”

More than 90% of retail transactions in Africa are still done in cash, including payments for utility bills and agricultural produce. This explains the long queues at banks, ATMs and payment centres. Instead of ‘Cash is King’, Africa needs to run a campaign for ‘Time Is Money’ (TIM).

The Ghanian flag
The Ghanian flag
The Ghanian Cedi
The Ghanian Cedi (GHS) was introduced in July 1965 to replace the Ghanian Pound. Cedi is the Akwan word for cowry shells which were used as currency

Data from GSMA shows that the detail matters:

  • Sub-Saharan Africa accounts for 45.6% of the 866m mobile money accounts globally (2018 data)
  • The global average transaction is $206 per month which means large transactions are not performed using mobile money
  • Activity rates in Sub-Saharan were 37% which shows that only 4 out of 10 people with an account actually use it
  • Mobile money in Sub-Saharan Africa is supported by an army of agents (1.4m in 2018) who have 30x the coverage of ATMs and 60x more coverage than bank branches

“Mobile money is nothing more than a mechanism for transferring cash”

The evidence shows that mobile money is more a money transfer service than it is a payment mode. The same GSMA research shows that:

  • 69% of in-coming transactions are made via mobile agents in cash and 72% of transactions are cashed out
  • 18% of transactions are bulk disbursements and these make up 85% of transactions in circulation
  • Bills payments account for only 15% of outgoing transactions
  • International remittances into and from Sub-Saharan Africa account for 1-2% of all transactions

It is clear that mobile money cannot replace bank accounts but why is the adoption of bank account still low?

The Egyptian flag
The Egyptian flag
The Egyptian Pound
The Egyptian Pound (EGP) notes were introduced on 3 April 1899. Coins had been in circulation since 1836. The notes have bilingual text in English and Arabic

Bank accounts

It is estimated that 1.7 billion people around the world remain unbanked, without an account at a financial institution or with a mobile money provider. In Nigeria, which is Africa’s richest country on paper, 60% of its nearly 200m people do not have a bank account.

Some of the reasons people do have bank accounts are:

  • Stringent KYC requirements such as proof of address or income
  • High minimum balance thresholds
  • High monthly maintenance fees
  • Convenience as bank branches are not widespread

African countries could learn from India where Prime Minister Narendra Modi issued a directive in 2014 to provide a bank account for every household. As a result India’s banked population more than doubled between 2011 and 2017 and now covers 80% of the population. Utilisation of these accounts remains a challenge however, India has taken the first key step towards achieving universal banking.


E-wallets provide an alternative to using debit and credit cards. However, the world’s leading digital wallets – Apple and Google Pay - are not available in any African country which is disappointing. Samsung has solidified its position as the leading mobile phone company in Africa by offering Samsung Pay in South Africa. Partner banks include Absa and Standard Bank which have a wide footprint across Africa giving hope that Samsung Pay could be available in other markets.

The Malagasy flag
The Malagasy flag
The Malagasy Ariary
The Malagasy Ariary (MGA) is one of only two non-decimal currencies in the world! It was introduced in 1961 and replaced the franc as the official currency currency in 2005.

Blockchain-based payment growing in Africa

In an exclusive interview with, Techpreneur and BTC King Founder, Dee Duncan shared his plans to bring blockchain contactless payments to Africa. His firm sells point-of-sales devices that allow for payments using Visa, MasterCard, Google/Apple/Samsung Pay as well as cryptocurrency. He also explained the benefits of using cryptocurrency for cross-border payments: money transfers take less than an hour instead of a few days and costs 95% less than a normal bank transfer.

The competition in the crypto space is heating up.  Bundle, the social media app backed by Binance, was launched in Nigeria in April 2020 and offers a digital wallet for both cash and cryptocurrency with no fees. As adoption across the continent increases, crypto has great potential but success will be dependent on the future regulatory environment.

There is a growing acceptance of cryptocurrency in Africa

Final word

It is time for Africa to take meaningful steps to make digital payments a reality. Governments and Central Banks will need to take a holistic approach in order for this to be a success by digitising and linking various aspects of the economy from national identity to bank accounts to making and receiving payments. The private sector can support the initiative by choosing to go cashless which will have the greatest impact on consumer behaviour.


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