By VINCENT OWINO

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Mobile money transactions defied the competition last year, hitting a new record high globally despite the emergence of alternative digital payment platforms.

The latest mobile money industry report by the Global Systems for Mobile Communications Association (GSMA) shows that global daily transaction value in 2022 surpassed forecasts to hit $3.45 billion, as the total value transacted on mobile money platforms grew by 22 percent to hit $1.26 trillion.

In East Africa, 41 million new mobile money accounts were registered last year, growing the number of transactions by 18 percent to 28 billion, worth about $491 billion. This is 23 percent higher than in 2021.

Tanzania has registered 3.2 million more mobile money subscribers in the first quarter of 2022. PHOTO | FILE | NMG

“Our data shows that the habit of using digital payments, enforced by the pandemic, has stuck, leading to mobile money activity growth outstripping new registrations in many countries,” said GSMA Director-General Mats Granryd.

Read: Lessons on digital currencies from mobile money

“Some key contributors to the growth of mobile money in the past few years have been regulatory changes in large markets.” Besides a less stringent regulatory environment in many countries, more people are embracing mobile money to gain access to financial services such as saving and borrowing as economic shocks heighten the cost of living globally,” the report says.

The number of customers receiving loans through their mobile money accounts grew by 18 percent last year, with credit remaining the leading non-payment service offered by mobile money platforms.

But the biting cost of living didn’t drive uptake of mobile money services only. The latest data by Statista shows that other digital payment solutions are also on the rise, as people look for cheaper ways of transacting online.

Stiff competition

Last year, new payment platforms including Buy Now Pay Later (BNPL), cryptocurrencies and central bank digital currencies (CBDCs) also posted record levels of transaction values, posing stiff competition for mobile money platforms.

Insights by German data firm Statista shows that payments using cryptocurrencies totalled $1.2 billion in 2022 and is projected to hit $4.1 billion by 2029. CBDC payments amounted to $0.1 billion last year but is forecast to grow by over 160 percent to $213 billion by 2030.

Crypto currencies. PHOTO | SHUTTERSTOCK

BNPL platforms recorded transactions worth $112 billion last year, which is expected to grow to $437 billion over the next five years. Examples of such platforms in the region are Lipa Later in Kenya, Jazika in Tanzania, Moovah in Uganda and Nxt in Rwanda.

Read: 5 cryptocurrencies popular among South Africans

High cost of living

Raynor de Best, Statista’s financial services specialist expert argues that the rise in these alternative forms of digital payments is mostly because the high cost of living is pushing people to explore cheaper options of making payments online, as mobile money transaction fees remain relatively high.

“Our research showed that the rising cost of living influenced the choice of payment method for at least 48 percent of people globally,” de Best said at a webinar convened by Statista Thursday.

In particular, people are using these alternative payment methods for online shopping and remittance to beat the high transaction costs charged by mobile money platforms and banks for transfer and cash-out services.

The GSMA report shows that customer fees, charged on such transfers, payments and cash-outs, constitute about 79 percent of revenues for mobile money operators, a decline from the 87 percent recorded in 2020.

But despite these alternative payment platforms gaining traction globally, experts argue that they are unlikely to surpass mobile money volumes any time soon, as many of them are still riddled with a host of challenges.