Africa remains a hotbed of mobile innovation. Telco operators across the continent are stepping in to fill gaps left by lower levels of development in key areas, including banking and financial services.

A 2022 report estimated that just over half of Africa’s population remained unbanked. The same report found that banks across the continent are investing in digital transformation projects, with the development of mobile money services the top priority among banks surveyed.

But it is arguable that telcos are in the inside lane when it comes to developing tailored financial services products to suit a mobile-first consumer than their banking counterparts.

Take the example of mobile money, which represents a significant growth opportunity for telcos. In 2022, the value of mobile money transactions in sub-Saharan Africa reached $832-billion, with an estimated 390 million mobile money accounts in East Africa alone.

Banks also find it far more difficult to move into the telco space. Conversely, telcos more easily move into traditional banking, as can be evidenced by the ongoing telco gold rush for financial services.

Mobile money kickstarts telco financial services

This gold rush arguably started with the incredible success of M-PESA. Launched in Kenya by Vodafone and Safaricom in 2007, M-PESA quickly grew to become the most successful mobile financial service in the developing world, registering 17 million accounts in Kenya alone by 2012.

M-PESA enables unbanked customers to deposit and withdraw money, transfer funds to other users, and conduct a range of additional transactions such as airtime purchases and bill payments.

The service grew in popularity in part due to inefficiencies with Kenya’s banking sector at the time, which made it difficult and costly for citizens to access banking services and make payments or transfers.

Today, telcos across the continent are leveraging their large user bases, strong brand awareness, consumer data insights and visibility over customer behaviour to introduce a range of innovative payment, remittance, insurance and other financial services.

Challenges and risks abound

However, this gold rush for diversified revenue is not without peril.

The financial services sector is highly regulated, and while the sector lagged behind in maturity, regulators are now catching up to the needs of a modern financial ecosystem.

A telco offering loans, for example, will need to take into account a number of regulatory requirements ranging from credit scoring to risk analysis and legislation restricting the flow of funds across borders.

For a continent so reliant on remittances, this additional regulatory oversight can hamper adoption of new financial services and undermine telco profitability.

Leveraging tech providers’ expertise

For African telcos seeking to unlock new revenue streams with the introduction of financial services, the answer lies in leveraging expertise and infrastructure developed by specialist providers that keep pace with regulatory requirements while refining user experiences and back-end operational efficiencies.

For example, telcos using Itemate’s point-of-sale system can quickly and easily enable new financial services offerings through a single integration at the point of sale.

To encourage adoption of new financial services innovations, telcos can incentivise dealers to promote specific products – an insurance product or loan offer, for example – with consumers able to immediately register and start using the product with the POS acting as the enabling platform.

And as new regulations emerge, the provider can implement the necessary changes that are implemented across the telco’s customer-facing dealer networks, ensuring customers can enjoy the convenience of mobile financial services while helping telcos maintain regulatory compliance.

Africa’s vibrant telco sector is set for a bumper year in 2024 as it expands operations and broadens service offerings to meet the needs of an increasingly digital-savvy customer base. 

Industry projections estimate the Africa telco sector will grow by $2.24-billion between 2020 and 2024, with longer-term growth expected to be powered by the rollout of high-speed 5G connectivity and a growing suite of complementary services, specifically in the financial services sector.

In conversation with telco executives throughout East, West and Southern Africa over the past few weeks, a number of common challenges have emerged.

Telcos are seeking to safeguard current revenue streams through improved downstream visibility, especially over their B2B partners.

At the same time, a slew of new customer-facing services and innovations hold the promise for greater profitability over the long term. This will require bold action – if telcos are not willing to take risks to drive greater innovation, there are inevitably new upstarts that will, claiming market and revenue share in the process.

As African telcos try to strike a balance between higher profitability and better revenue protection, these are the key trends they should take note of in 2024:

Digitalisation drives greater visibility over B2B channels 

In telco markets across the continent, from Kenya to Ivory Coast to Tanzania and Swaziland, operators rely heavily on dealers or resellers to drive sales and service customer needs.

But a lack of digitalization has left many telcos with little visibility over their B2B channels, creating challenges with inventory management, revenue projections and cost management.

The emergence of new technology platforms and tested systems to provide greater downstream efficiency and visibility will transform telcos’ ability to leverage their dealer channels for strategic advantage. While there may be some cultural resistance to greater digitalisation, telcos could use incentives – such as discounts – to get dealers on board.

This may also unlock significant revenue opportunities for B2B partners who can leverage digital capabilities to utilise a broader range of products and services and better meet customer needs.

Innovation powers improved customer experiences 

Once their digitalisation efforts are complete, telcos can enable a far richer suite of products and services, driving higher levels of customer experience.

This can take the form of tailored financial services such as insurance products or mobile money, as well as emerging innovations such as Buy Now, Pay Later (BNPL).

The key is to integrate these services at the point of sale to ensure a quick and seamless customer experience. Considering the growing regulatory requirements in several African countries, telcos should ensure their customer-facing technology can meet KYC requirements to enable the delivery of new services.

Ideally, telcos should seek point of sale solutions that boast efficient transactional flows and that can cater to the varied operational requirements of Africa’s telco industry, with a rich list of preloaded features and modules.

 eSIM adoption hits its stride 

While there are still holdouts in all African markets, most consumers are shifting away from feature phones to more function-rich smartphones. Industry data indicates feature phone volumes will decline from 66.3 million in 2019 to only 43.1 million by 2028.

The adoption of smartphones will also speed up the rollout of eSIMs, which hold significant benefits for telcos and their efforts at delivering a richer suite of value-added services to their subscriber base.

This growth will be driven mainly by a younger user base hungry for access to social media platforms and the benefits of Africa’s burgeoning e-commerce sector.

Expect telcos to run extensive promotional campaigns on social media to lure younger users on to smartphones, from where they can deliver a rich suite of services to drive greater revenue and profitability.

“Established incumbents and upstart competitors have an unmissable opportunity to elevate their customer experience by providing improved service, greater personalisation, and greater flexibility in customer interactions. And at the frontline of this is the point-of-sale,” she said.

A recent McKinsey study highlighted the value of customer-led CX transformation as essential to the ongoing success of global telcos and to meeting the changing customer expectations that have come to define the consumer market.

A separate study by PwC found that 54% of telecoms leaders say that improving the customer experience was their top transformation initiative for 2022.

Van Heerden says, while the African market is hugely diverse with distinct local differences across regions, there are some key fundamentals that every telco can pursue.

“Investments into appropriate digital technologies will enable telcos to deliver scalable, flexible and localised services that meet customer expectations, drive profitability, and unlock new revenue streams.”

Based on her work with telcos throughout the continent delivering a range of digital tools designed to improve efficiencies, elevate customer experiences and drive revenue growth, van Heerden recommends advancements in three key areas, namely:

1. Increased speed

“One of the surest ways to ruin a customer experience is to make people wait in endless queues,” says van Heerden. “If people are regularly queued outside your service centre, chances are that your valuable customers may be looking to alternative providers to take the hassle out of what could be a simple process.”

Considering that a typical cashier operates up to 15 different systems at the point of sale to manage various customer transactions and services, the process of helping customers can quickly become excessively time-consuming.

Training of cashiers is essential to ensure they can assist customers in a timely manner, but even more critical is an intuitive and easy-to-use UX. “Modern POS systems provide rich functionality and high levels of usability, allowing cashiers to complete transactions and service requests with minimal fuss and optimal speed. And as new services emerge, the POS can easily integrate and enable services to drive continuous value for telcos and their customers.”

2. Greater flexibility 

To ease the integration of new services and simplify the interaction with customers when making various forms of transactions, operators need a flexible POS system that can scale up and down based on the telco’s requirements.

“Customers seek products and services based on their needs and socio-economic situation, which puts pressure on telcos to be flexible in the services they offer,” explains van Heerden. “Many countries’ economies work on a multi-currency basis, so customers want to be able to pay in local currencies or US dollars, for example. In others, mobile money reigns supreme, so telcos need a one-stop POS system that enables transactions across a broad range of payment and service types.”

3. Localisation

Just like its landscape and population, Africa’s telco industry is rich in diversity. But this diversity requires that telco operators continue to localise their services to suit the unique intricacies of their markets.

“In Tanzania, for example, customers have an inherent distrust of digital technologies and want physical airtime vouchers and scratch cards,” says van Heerden. “Here, telco operators have to empower their resellers and agents with the tools and technologies to provide physical stores of value while also building trust in digital channels and their benefits.”

Van Heerden adds that language localisation is critical. “In Benin and Cameroon, for example, service centre staff speak mostly French, while in Tanzania it’s Swahili and in Eswatini it’s Swazi. Operators need a POS system that can easily switch between local languages to ensure customers enjoy the best-quality experience when interacting with telco service centres.”