There is broad consensus in the development sector that information and communications technology is a major asset when designing highly efficient and accessible financial solutions that create jobs, generate revenue, attract more private investment and improve the population’s well-being. Recent buzzwords speak volumes about the high hopes for this technology: ‘uberization’ (use of services that put professionals and clients in direct contact, reducing costs), ‘leapfrog’ (extreme growth) and ‘M-Dorado’ (the all-digital paradise where digital financial services [DFS], rather than being a single solution, are a way of life).

Whereabouts on the road to this paradise are DFS in West Africa?

2017: A vintage year for digital financial services?

A report on mobile financial services in the countries of the West African Economic and Monetary Union revealed that 36.5 million people have electronic (e-) wallet accounts and 2 million transactions are processed each day on average, with a value of CFAF11.5 billion¹ (US$20.9 million).²

When it came to service providers, although the market remained dominated by mobile network operators such as Etisalat, Mobile Telephone Networks and Orange, regional banks breathed new life into the sector. For example, the Xpress Account by Ecobank and the YUP mobile wallet services by Société Générale—along with new agent networks and investments in commercial payments using contactless technology (such as NFC and QR codes)—provided signs that banks had decided to invest in the bottom of the pyramid, a market segment that traditionally had not been among their priority target groups.

Even microfinance institutions explored the use of mobile technology to make their services more accessible to clients. New approaches included the use of tablets to serve savings groups and the establishment of partnerships between microfinance institutions and e-money issuers to digitize the collection of savings and loan repayments via mobile phone. This approach was taken by Advans in Côte d’Ivoire, Association de Lutte pour la Promotion des Initiatives de Développement in Benin, Coopérative Autonome pour le Renforcement des Initiatives Économiques par la Microfinance in Senegal and Microcred in Senegal, which has the only network of banking agents being developed in the region.

The fintech revolution, which harnesses technology to improve financial services, also emerged. While fintech companies may only be small enterprises in the DFS ecosystem, they are nevertheless the most innovative, offering payment aggregation and/or distribution networks, mobile agricultural platforms that provide information and connect buyers and producers, as well as mobile health and mobile learning platforms. These innovations, such as InTouch, JokkoSanté, Li-Fi LED and Mlouma, are becoming increasingly popular in West Africa.

What about the adoption of these products by customers?

To accelerate the DFS revolution in West Africa, these services first need to demonstrate their added value for users—that is, for all users. What do the following individuals have in common: Khadi, a stallholder in the Fada N’Gourma market in Burkina Faso; Cheick, a small peanut producer in the Niayes region of Senegal; Dorcas, a fabric vendor in the Dantokpa market in Benin; and Fatou, a bar manager in the city of Abengourou in Côte d’Ivoire? They have been left behind by the traditional banking system. But, they all have a mobile phone that, while perhaps not a state-of-the-art smartphone, is functional and allows them to do far more than simply communicate—thanks to DFS. Using her e-wallet, Khadi can pay her suppliers, receive payments from her clients, make loan repayments, prepay her electricity and pay for her taxi fare home. Are these options not better for her than old bank notes, which were often dirty and could be easily lost or stolen?

Although users like Khadi recognize the potential of DFS, not all are ready to go completely digital. A possible reason can be summarized in one word: ecosystem. An ecosystem that provides access to points of sale that accept digital payments is perhaps the one element that would increase DFS adoption most. This assertion has been proven in Kenya; with the right ecosystem, the expansion of DFS follows almost naturally.

The progress made in 2017 is promising for West Africa. However, there is still work to be done to catch up with the dynamic markets in East Africa. When will savings and banking services be available on mobile devices? When will it be possible to access digital loans and interest-earning savings accounts on mobile devices? When will users be able to use e-wallets to pay for solar panel kits, home improvements and educational materials by instalments? When will services become interoperable in the sub-region? Clearly, the digital revolution is under way. It is now a case of speeding it up, with help from regulators, legislators, politicians, researchers, investors and private operators.

^{1. BCEAO, ‘Overview of Mobile Financial Services Data in the West African Economic and Monetary Union (WAEMU) in 2016’ (Dakar, n.d.). Available from https://www.bceao.int/sites/default/files/inline-files/3etat_des_services_financiers_uemoa_2016_anglais_.pdf↩}

^{2. Conversion rate: US$1 = CFAF549.01 (Source: https://treasury.un.org/operationalrates/OperationalRates.php, 31 December 2017).↩}