Founded in 2010, MFS Africa has grown into the continent’s largest digital payments network, connecting more than 320 million African mobile money wallets. The company expanded into Nigeria in October, with the acquisition of agent network Baxi, in what it describes as the country’s second-largest fintech purchase deal. In November, it announced $100m in Series C funding co-led by African private equity fund AfricInvest Five.
MFS Africa CEO Dare Okoudjou spoke to The Banker about the evolution of the agent banking model, the future of mobile banking on the continent, and the comparative advantages held by banks, fintechs and telcos in expanding access to financial services across the continent.
Q: What was the logic behind the company’s acquisition of Baxi?
A: There were three main objectives behind the deal. First, we wanted to anchor ourselves deeper in the Nigerian fintech ecosystem by partnering with a player that not only has a meaningful position in the market, but one that is likely to play a leading role as the ecosystem develops further.
Second, it’s our strong conviction that we’re seeing an evolution in the nature of agency banking. The first generation of mobile money agents across the continent has been providing services that are mostly limited to cash-in, cash-out. But we’re seeing an evolution of that model in Nigeria, and we think there will be a market for that model across sub-Saharan Africa in the years to come.
Third, we’ve developed a real conviction about reaching small and medium-sized enterprises (SMEs) in Africa, which we’re happy to provide services to across our markets. In doing so, however, we realised that a large percentage of African SMEs are still offline. So, we think that having an agent network such as Baxi provides a good intersection between the offline and online worlds.
Q: How do you see agency banking evolving in Nigeria and elsewhere on the continent?
A: I see it as ultimately acting as the distribution network that e-commerce needs to really take off in the continent, with agents providing Amazon Locker-type services on the streets of Africa.
Ahead of that, you can imagine agents that have a basic shop will be able to benefit from the services of someone like M-Kopa [asset financing platform] to run a fridge to store and sell fresh goods on a pay as you go basis. You can then build on that new capacity to professionalise and digitise their relationship with fast-moving consumer goods players, perhaps using agents’ storage and warehousing facilities.
Our role as MFS Africa is to ensure that such agents are able to get the basic connectivity to the digital economy to help them achieve such things.
Q: Digital financial inclusion in Africa has mostly been driven by mobile operators — is that likely to continue? What role will banks and fintechs play in driving financial inclusion even further?
A: If you look at the consumer retail market, it’s mostly going to be mobile networks that are going to continue to dominate, as they have a much closer relationship with their customers than banks do. And while the banks talk about the need to drive financial inclusion, there’s been very little innovation and drive to really push the envelope, with the notable exception of Nigerian banks that have had a head start over telcos.
While mobile operators remain dominant, we have started to see some interesting work done by fintechs, particularly in west Africa, that have captured market share; Wave in Senegal and Côte d’Ivoire has done this by mostly offering a superior agent and user experience, as well what is viewed as somehow aggressive economics.
Banks are still in a strong position when it comes to the wholesale market, as fintechs ultimately need to partner with at least one traditional lender. There will be winners and losers for sure, but it’s a space where banks still dominate.
While lending is a traditional stronghold for banks, they have been very slow to innovate, which has created opportunities for new specialist lenders to come in that are able to package debts in innovative ways and move much faster than established names in the market.
Q: What are your priorities for 2022, following your most recent funding round?
A: Beside the work ahead of us in Nigeria, we’re seeing a huge demand from SMEs across the continent to be able to make payments to China. That Africa–China payment highway is going to be a big priority for us going forward.
We’re continuing our march towards our goal of reaching 500 million mobile users across Africa by 2025. Obviously, being in Nigeria will help us achieve that.
