Despite a deluge of businesses launching new mobile payment platforms and a host of offerings being introduced to entice the consumer, Africa's mobile money market is not without its challenges. Experts say anti-competitive practices and the challenge of managing cash-based agent networks continues to escalate costs, and this is having an impact on growth.

In 2015 a host of companies announced details of their quest for a share of Africa's mobile payment space and extend their reach to the continent's diaspora. In June of that year online and mobile phone cross-border money transfer service Transfast launched a new electronic banking service, while in November Econet Wireless said it was looking to recruit agents to support the expansion of its EcoCash platform.

In December industry analysts spoke of a challenge by mobile money operators in Tanzania, Zambia and Zimbabwe to Kenya's traditional dominance in the space, driven primarily through the likes of M-Pesa. The prediction is that in 2016 markets should expect strong adoption of merchant payments and international remittances.

In May last year Alix Murphy, Senior Mobile Analyst at global mobile money transfer service WorldRemit (which itself recently announced a money sending alliance through MTN Mobile Money in Rwanda, Uganda and Zambia), voiced her concern over dominance by merged ventures of the offline segment of the remittance market and the possibility of overcharging in some regions.

Today, almost nine months later, Murphy believes there has been little progress made. "Sadly, the 'remittance super-racket' still exists today. The Africa Progress Panel has rightly called attention to the anti-competitive practices used by the industry's biggest players. Unfortunately these practices and the challenges of managing cash-based agent networks mean that the cost of sending money is still painfully high for many people sending home to the developing world," says Murphy.

She quotes statistics from The World Bank which suggests that at an average cost of 9.53%, Sub-Saharan Africa remains the most expensive region to send money to. "Yet costs can be as high as 14 – 17% to send to some African countries," she adds.

Room to move

But, is there room for online and mobile-based remittance services? Yes, according to WorldRemit's executive. "Far from being saturated, there is actually huge room for growth in online and mobile-based remittance services as the vast bulk of remittances globally are still sent in cash through high-street agents, or through informal networks. (In fact some estimates put the global market for personal remittances at up to double the existing World Bank figure of $600 billion due to uncounted informal remittances). Bringing these remittances online and into the formal sector will have huge positive impact on customers and developing economies," says Murphy.

ICT analyst Adrian Schofield says the mobility of labour in Africa between the poorer and more developed economies has traditionally created a strong remittances market, much of it in cash, carried across borders in person or using "trusted" carriers. More formal transfers using companies like Western Union and the banks would be more reliable, but the charges were expensive.

Schofield adds that the arrival of the mobile phone began to change the market and from the early days of airtime transfers, has developed to the emergence of money transfer systems like M-Pesa, MTNMMO supported by the network providers, and also alternative money systems like Bitcoin.

While it could be envisaged that online/ mobile systems will erode traditional methods, the key is trust he says. "Do the users trust the system and what premium are they willing to pay to mitigate the risk of loss in transit? The more choice they have, the more likely it is that costs will decrease."

Waiting to disrupt

The industry still faces big challenges – mostly around those cash-based models, says Murphy. "For us as an online business this can also be a challenge - in some cases, regulators don't always recognise the difference between new online models and traditional models. Bitcoin, and, more importantly, the underlying blockchain technology, has huge potential. While we're keeping an eye on Bitcoin, we currently don't see cryptocurrencies as a viable alternative to fiat currency remittances."

"Bitcoin has suffered high-profile scandals, and is heavily associated with drug trafficking and money laundering. The remittance sector is strictly regulated for good reason and many financial institutions have incurred huge fines for failing to adhere to AML and CTF legislation in recent year," she says.