Mobile money oversight providers in Africa: Building trust in the ecosystem
From humble beginnings in 2007, mobile money is now considered as a mainstream financial service in many African countries. The pandemic promoted this evolution. However, despite their significant benefits in terms of financial inclusion, mobile money services are vulnerable to fraud and cybercrime. Mobile money oversight providers in Africa can support the regulators in ensuring compliance and security in the ecosystem through the technological tools they offer.
The bright side: mobile money as a driver of financial inclusion
Mobile Money has done a lot to improve financial inclusion in Africa. Since its launch in Kenya in 2007, this disruptive service has given millions of unbanked people access to financial services. Over the past ten years, it has rapidly expanded on the continent. As of 2020, there were more than 469 million registered mobile money accounts in the sub-Saharan region.
According to the GSMA’s State of the Industry Report on Mobile Money 2023, adoption and usage continue to rise. For example, the number of registered accounts increased by 13% in 2022, compared to the previous year. The most significant growth occurred at the level of bill payments. In 2022, the latter rose by 36%, partly due to better integration between MM providers and companies. Global daily transaction values, however, have exceeded the predictions, increasing by 1.45 billion USD instead of the expected 1 billion.
It is therefore no wonder that mobile money is currently seen as a mainstream financial service in Africa.
The dark side: mobile money’s vulnerability to fraud
However, the GSMA warns that fraud remains “an industry-wide issue”. Indeed, MM’s ubiquity and popularity in Africa make this service a target for criminals intent on getting hold of sensitive and confidential data that will give them access to users’ accounts. Thirty-one percent of MM account holders in the Sub-Saharan region need assistance to use their accounts, due to a lack of understanding and digital skills. This makes the criminals’ task easier. Fraud in MM services takes various forms. These include identity theft, mobile app fraud and scams, money laundering, terrorism financing, and social engineering.
In Kenya, for example, the Directorate of Criminal Investigations arrested eight individuals for stealing over 500 million KES from MM users, reports ITWeb Africa. The fraudsters had registered over 123 000 mobile SIM cards after illegally accessing identification information. They then used the registered SIMs to take up loans.
In Malawi, criminals steal approximately 117,000 USD through mobile money transfers every month. They manage to do so by exploiting the users’ lack of education and by using identity theft, fake promotional SIM swap services, SMS fraud and impersonation. Similar fraud cases have also been reported in Uganda, says The Monitor. There, the perpetrators illegitimately access MM accounts by impersonating someone the victim knows or trusts, or by purchasing and using SIM cards registered in the name of now passed-on users.
Fraud can cause consumers to distrust MM services, which negatively affects MM usage and, by extension, financial inclusion. Another factor that undermines trust in the MM ecosystem is the existence of gaps in terms of data protection. So far, regulators have addressed these issues through consumer education initiatives, data protection regulations and consultation with the service providers.
Additionally, MM accounts can serve to launder money and finance terrorism. Criminals can easily bypass KYC measures and transfer large amounts in many small payments using multiple accounts and SIM cards. Furthermore, most MM transactions are limited to an amount not exceeding a few hundred dollars. They can thus easily slip under the regulator’s radar. The US State Department recently voiced such a concern in relation to M-Pesa, Kenya’s leading MM platform. Indeed, the fact that M-Pesa enabled cross-border money transfers with other countries facilitates illicit international financial flows.
Hence the need for effective oversight, especially over a dynamic MM ecosystem such as the African one.
Mobile Money oversight providers in Africa: the regulators’ technological partners
Oversight of the MM ecosystem is the responsibility of the government and of the relevant regulator. However, the sheer volume of MM transactions carried out daily in Africa, together with the lack of regulation and transparency of these services, significantly limit the authorities’ visibility over the ecosystem. What the authorities need is digital tools that enable them to trace MM transactions for improved AML and CFT processes.
Some regulators have already called on Mobile Money oversight providers in Africa to implement such platforms, with a view to improving the governance of their dynamic MM market and curb fraud. In Congo, Ghana, Rwanda, and Tanzania, for example, GVG’s Mobile Money Monitoring (M3) solution has helped the relevant authorities significantly reduce fraud in their respective MM market. M3 collects, in real or near real time, the Big Data the MM services yield daily. It then analyzes it to provide the regulators with actionable information they can use to support effective decision-making and promote compliance and security in the sector. In Tanzania, the communications regulatory authority, the TCRA, and the central bank can now trace no less than 100% of the MM transactions carried out in the country thanks to M3.
The data that M3 gathers could also prove very useful as evidence in financial investigations. In that respect, the Basel Institute on Governance recommends leveraging mobile payment records to reinforce countries’ defences against money laundering and the financing of terrorism.
The success of MM in Africa has made this service a target for criminals. However, its benefits, such as enhanced financial inclusion, make it a crucial economic sector that is well worth protecting. Mobile Money oversight providers in Africa enable governments to do so, by giving them optimal visibility over the ecosystem and, in the case of M3, by supporting data-driven decision-making. The countries that have implemented oversight technology have achieved compelling results in terms of MM compliance. We, at GVG, believe that these results, together with the dynamic growth of MM services will only motivate unequipped countries to follow suit.
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