West Africa Rising: Mobile-phone banking making slow but steady inroads

• West Africa Rising is a weekly look at business, investment, and development trends.

Mobile banking, which has already revolutionized the economy of Kenya, is starting to make serious inroads in West Africa, where mobile phones are ubiquitous but bank accounts are scarce.

Hoping to emulate the blockbuster success of their counterparts further east, new providers are springing up from Senegal to Cameroon, offering customers in one of the poorest corners of the world the chance to send and receive money via text message for relatively small fees. But the mobile sector in West Africa is different than it is in Kenya, and mobile banking operators here are being forced to adapt to stay alive.

In Kenya, Safaricom dominates the mobile phone market, with more than 12 million subscribers and a 72 percent market share. The company’s mobile banking service, M-Pesa, which was launched in 2007 and is available only to Safaricom customers, hosted more than $8 billion in transfers last year.

Here in West Africa, multiple providers vie for customers’ loyalty within each country, making the sector much more competitive. Some of those providers – like Vodafone in Ghana, Orange in Ivory Coast, and Airtel in Sierra Leone – now allow their customers to transfer money to other phones within the same network.

But most West Africans are likely to have friends and relatives who use a different phone network than their own, so such services might not meet their needs. That gap opens the door for a very different type of mobile banking provider: the so-called “network-agnostic” or “network-neutral” service, which operates across the mobile phone landscape.

In Sierra Leone, a little company called Splash is one such provider, offering money transfer services to customers of all three of the country’s major mobile networks. But nearly two years after its launch, Splash has just 55,000 subscribers and 10,000 active users. That’s much fewer than the company had predicted.

The company “went through some growing pains,” admits Daniel Osei-Entwi, Splash’s managing director and one of its initial investors.

“We were a no-name brand – we’d just come onto the market – and we asked people to trust us with their money. That didn’t happen as quickly as we thought,” he says.

Other network-agnostic providers – like Obopay in Senegal and TxtNpay in Ghana – have faced similar challenges, says Mr. Osei-Entwi. But he notes that similar companies in Zambia and South Africa have turned a profit after several years of slowly growing their networks.

So now Splash is working to build consumer trust by setting up partnerships with local banks and retailers. The strategy seems to be working; the company has doubled its monthly transfer volume in just five months.

But they’re still a long way from Safaricom-like market dominance, and it’s not clear they’ll ever get there.

“Mobile money is a low-value, high-volume business which best fits the business strategy of a mobile network operator,” says Emmanuel Okoegwale, the principal associate of Mobile Money Africa, a Nigerian-based online resource for the continent’s mobile banking sector. “Network-agnostic mobile-money providers will have to develop [their] network from scratch.”

Splash may still be small, but it’s won some loyal fans in Sierra Leone. One of them is Claudio Scotto, the CEO of Africa Felix Juice, a juice-processing company based outside Freetown, the country’s capital. Mr. Scotto estimates that between 40 percent and 50 percent of all of the money that his company transfers goes via Splash.

“It’s the cheapest, quickest, and best way to send money around,” he says.