Merchant payments drive mobile money growth in 2021
The GSMA recently published the tenth edition of its annual State of the Industry Report on Mobile Money, which captures data and insights on the growth of the mobile money sector, particularly in low and middle-income countries. We explore the findings of the report as they relate to small businesses, looking at the growth of merchant payments and the persistent gender gap in mobile money account ownership.
While the COVID-19 pandemic has disproportionately impacted small businesses, it has also encouraged many to adopt digital financial services. Digital financial services can be transformative for small businesses, especially if they were previously unbanked or otherwise excluded from formal financial services. Mobile money is perhaps the most noteworthy example, gaining popularity and growing rapidly across the globe over the last decade, especially in Africa, East Asia, and Latin America.
More recently, mobile money has become more relevant in the lives of merchants, who are amongst the most common small businesses globally. In the early phase of the pandemic, consumers turned to mobile money as an alternative to cash to pay for goods and services, causing the global value of merchant payments via mobile money to grow by 43% in 2020 compared to the previous year. Now, in its latest report, the GSMA finds that merchant payments have continued this upward growth, with global values almost doubling. In 2021, merchant payments reached an average of $5.5 billion in monthly transactions, up from an average of $2.8 billion in 2020.
For the GSMA, 2021 saw the mobile money industry become more central in helping small businesses operate more efficiently, as mobile money transactions beyond person-to-person transfers, such as merchant payments and bill payments, became more relevant. Its findings also highlight a considerable increase in the number of merchants accepting mobile money as a payment method: between September 2020 and June 2021, the number of active merchants that had accepted a mobile money payment in the previous month rose by 47%.
What led to this acceleration? The GSMA points to improvements from both regulators and mobile money providers. For instance, the Bank of Ghana introduced regulations to facilitate the onboarding of micro and small merchants that may not meet the threshold for know-your-customer (KYC) requirements. Providers have also tried to streamline processes for merchants, for instance, by offering remote onboarding. In Kenya, more than 18% of new merchants are self-onboarding through Safaricom’s Lipa Na M-PESA merchant portal.
The gender gap in mobile money persists
Women-led micro and small businesses have been particularly affected by COVID-19. Despite the potential of digital payments to offer women greater flexibility and a sense of empowerment, the GSMA’s report finds that women are still less likely than men to own a mobile money account across low and middle-income countries. While global data on mobile money account ownership showed a 33% gender gap in 2017, more recent GSMA data from ten countries confirms that this mobile money gender gap continues to persist, ranging from 46% in Nigeria to 68% and 71% in Guatemala and Pakistan.
While there’s no single barrier that prevents women’s ownership of mobile money accounts, factors contributing to this gender gap include affordability, relevance, access, knowledge and skills, in addition to the structural barriers that exist beyond the realm of digital technology.
Looking ahead
Increasing adoption of mobile money for merchants has the potential to lead to increased profitability and the adoption of other digital tools that improve small business outcomes. For digital payment products to be a worthwhile alternative, however, providers must continue to ensure that their solutions are as convenient as cash and offer additional benefits, such as addressing some of the growth constraints that small businesses regularly cite including difficulties in managing customer relationships and a lack of business intelligence data.
More can be done to address the gender gap in mobile money account ownership. Policymakers, providers, and the wider industry all have a role to play in addressing the barriers that prevent women from owning mobile money accounts, developing products that address the unique barriers that women face, and encouraging women-led small businesses to use digital payments, such as through digital training and peer communities.
