The coronavirus is upending cash economies. Mobile money could emerge as the winner.

This article was published by The Washington Post on 15 May 2020.

By Miriam Berger 

When Lagos went into lockdown last month, banks in Nigeria’s bustling financial hub shut their doors. But many agents who offer financial services informally, crucial commerce for the city’s impoverished communities, continued to work using mobile payment apps on their phones, helping customers transfer money and pay bills.

“We’re a country where people live day-to-day and barely have savings,” said Tayo Oviosu, CEO of Paga, a Nigerian mobile money company. He estimated 75 percent of Paga’s agents active in March worked through the city’s five-week lockdown, which lifted May 4.

In the United States and elsewhere, mobile money services like Apple Pay, Google Pay and PayPal, along with its subsidiary Venmo, are rising in popularity by offering mobile wallets that allow users to send money digitally. A similar model has taken off in developing countries, particularly in Africa, targeting those with no or limited access to the banking and financial system. Experts and members of the industry say the pandemic is likely to escalate that trend.

Oviosu described Paga as a “PayPal for emerging markets,” with 15 million users in Nigeria, who do not need bank accounts to use the service. Agents — often in mom-and-pop street-corner shops — collect cash from people and then add it as credit to accounts connected to phones.

As the coronavirus spreads, businesses and governments, struggling under the weight of the pandemic, are looking to limit cash exchanges, which the World Health Organization has warned could transmit the virus. Mobile money has emerged as an alternative.

Companies and industry experts told The Washington Post they have seen overall rises in new mobile money users globally over the past six weeks, even as the total value of transactions has fallen amid economic duress. Over a dozen countries have also reduced barriers for private transactions, for instance by lowering fees and raising daily limits, and some have used mobile money to deliver emergency funds.

“Leveraging that channel during times of redress is really a lifeline to those who are most vulnerable and sadly impacted by the COVID crisis,” said Sabine Mensah, the regional digital lead for the United Nations Capital Development Fund (UNCDF).

The economic downturn has already hit hard. The International Labor Organization warned that about 1.6 billion people working in informal economies — or up to half of the world’s workforce — are at risk of losing their livelihoods as a result of the pandemic.

Mobile money growth

Since Vodafone and Safaricom in Kenya launched the M-Pesa mobile money model in 2007, the industry skyrocketed to service nearly a billion registered accounts and close to $2 billion in daily transactions in 2019, according to the London-based GSMA, a group that represents the interests of mobile operators.

The services have found traction in East Africa, and increasingly across the rest of the continent, South Asia and the Middle East — regions in which many people do not have bank accounts.

Despite the pandemic and shutdowns, the industry is still making inroads. Over the past two months, Paga doubled to some 14,000 the number of merchants, such as restaurants and shops, that accept payments on the platform, Oviosu said. The company says it has also seen a more than 200 percent quarterly increase in users. (The company would not provide an exact figure.)

Orange Money, a mobile money service provided by the French telecommunications company Orange and active in 17 countries, has seen a 20 percent rise in merchant payment transactions worldwide since the last week of March, said Cedric Lemaire, an executive in the company’s Middle East and Africa division. User growth aside, transactions are down some 10 percent globally, which Lemaire attributed to pandemic economic pressures. During a three-day lockdown in Sierra Leone last month, Orange Money saw a 90 percent drop in transactions, he said.

Ruan Swanepoel, the head of GSMA’s Mobile Money program, said he had also observed a decline in “cash-in, cash-out” transactions during lockdowns. While exact figures that reflect the current state of the industry are not yet available, he said he expected an overall increase in the number of mobile money account holders, transactions and merchants once more countries reopen.

The trend is not limited to the developing world: Dan Schulman, the CEO of PayPal, which is available in more than 200 countries and regions, told Fortune magazine that the pandemic has given his business “a tremendous surge.”

Governments step in

More than a dozen countries have taken steps to increase the use of mobile money during the pandemic.

The first to do so was Kenya. In mid-March, Safaricom — the country’s largest telecommunications company, which runs the popular M-Pesa service — waived fees on all person-to-person transactions under 1,000 Kenyan shillings, or about $10, and raised the daily transaction limit for small and medium-sized businesses.

In Pakistan, where mobile wallet use remains limited, the government in mid-March waived all online banking charges to promote digital transactions during the pandemic.

Ghana went one step further.

Creating a mobile wallet is in theory easy: A user needs no more than a phone, a little money and a sim card. To obtain the latter, however, governments often require an official form of identification. These regulations are intended to prevent financial crimes and provide state oversight, but they serve as barriers for populations less likely to have documents and more likely to be poor, such as migrants, refugees, women and people living in rural areas. So in mid-March, the country’s central bank changed criteria to allow any mobile phone subscriber to establish a mobile wallet and transfer up to $170 daily. To transfer more by phone, however, they will need to provide further identification.

Across Africa there’s talk of harnessing these services to transfer emergency aid, but for now cash distributions remain the norm, said Mensah of UNCDF. A handful of countries already had the mechanisms in place before the pandemic, however, and are now making use of them.

As part of Bangladesh’s coronavirus relief efforts, the government is providing $30 a month to about 5 million impoverished families using one of the country’s four mobile financial services. Cambodia, Chile, Colombia, India, Peru and Thailand are also transferring emergency funds to bank or mobile money accounts, to bypass the possibilities for corruption and contamination inherent to cash.

Barriers to entry

Mobile money platforms provide a much-needed service, but they are no quick fix for institutionalized structures, which the coronavirus has only exacerbated, that keep the world’s most destitute and vulnerable people poor.

“Those people who have been [financially] left behind before the crisis,” such as women, refugees and migrants, “are now hit even harder,” said Alfred Hannig, executive director of the Malaysia-based Alliance for Financial Inclusion, a think tank.

Participation in mobile money markets require consistent Internet and a steady flow of cash. There are also cultural barriers. In conservative Pakistan, for example, most mobile money agents are men, which means it can be difficult for lone women to interact with them, Hanning said.

Obstacles aside, Oviosu of Paga said that mobile money services are likely to emerge from the pandemic stronger than they were before.
“One of the trends that will come out of this is the world moving toward a more digital financial system,” he said.

written by: Miriam Berger 
Miriam Berger is a staff writer reporting on foreign news for The Washington Post from Washington, D.C. Before joining The Post in 2019 she was based in Jerusalem and Cairo and freelance reported around the Middle East, as well as parts of Africa and Central Asia.