West Africa: Payment Trends and Popular Payment Methods

West Africa is brimming with opportunities. Rapid economic expansion and an improving business landscape will unleash transformative growth in a region that covers about half the size of Europe. 

While infrastructure still lags behind other developing parts of the world, digital solutions are already starting to help plug the gaps to satisfy the needs of its fast-growing business and consumer markets. And given its largely unbanked population, payments innovation is crucial to delivering solid and sustainable development to unlock the region’s economic potential.

In this article, we highlight some of the key trends in West Africa.

1. West Africa – region overview

West Africa includes the following countries: Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo. The region covers an area of 5,112,903 km², about half the size of Europe.

Fast-growing Youthful Population

West Africa’s population is the fastest-growing of any of the world’s regions. Sub-Saharan Africa’s population is growing at 2.7% a year, twice as fast as South Asia (1.2%) and Latin America (0.9%). 

The current population of West Africa is just over 420 million, about half of which live in Nigeria, the most populated country in Africa. By 2050, Nigeria’s population is forecast to reach 400 million people, climbing from 7th position and overtaking the United States to become the world’s third-most-populous country.

Like the rest of the continent, West Africa’s population is predominantly young, with more than 40% of people under 18 years old – a decade less than the global figure. Nigeria has a median age of 18, and only 5% of its people are 60 or older. Meanwhile, Niger has the world’s youngest population, with half age 14 or younger.

Economic Growth

A youthful population with increasing numbers reaching the working age could bring major economic advantages to the region. The World Bank estimates that this demographic dividend could generate 11-15% GDP growth between 2011 and 2030.

West Africa has undoubtedly seen impressive economic growth in the past two decades. Since 2000, the region’s collective GDP has risen from $105 billion to more than $659 billion in 2020. The largest economies in the area – Nigeria, Ghana and Côte d’Ivoire – accounted for one-quarter of Africa’s GDP in 2020. At the same time, there is an uneven distribution of wealth, with a report revealing the wealthiest one per cent of West Africans own more than everyone else in the region combined. Extreme poverty remains in many parts, with the impact of Covid-19 adding to the hardship for communities.

Increasing Urbanisation

The region continues to urbanise rapidly, with rural-urban migration leading to unprecedented growth of cities. Lagos, Nigeria, is projected to become the world’s most populous city by 2100. In three projections by the University of Toronto’s Global Cities Institute, Africa accounted for at least 10 of the world’s 20 most populated cities in 2100.

Accelerating Mobile Internet Adoption

Most people in the region access the Internet through mobile phones rather than fixed broadband.

Mobile Internet coverage in West Africa is proliferating. For instance, coverage in Senegal increased from 66 per cent to 98 percent between 2015 and 2020. 

70% of total connections in West Africa will be via smartphone by 2025, climbing from 38% at the end of 2018.

West Africa’s young, digitally-savvy consumer base will encourage a shift in demand for more data-centric, non-core communications services from mobile, such as online gaming and video streaming. Mobile phones will also help accelerate a transition from informal money management to financial inclusion by leapfrogging legacy banking and payment systems. However, the price of mobile data in the region is among the highest globally, adjusted to the cost of living. And while ownership is increasing, only 40% of West Africans own a mobile phone.

2. Key payment trends

People in West Africa still pay primarily with cash. 

Like most other parts of Africa, people in West Africa have limited access to traditional banking services.

In sub-Saharan Africa, only 37% of women and 48% of men have a bank account, according to the World Bank. Meanwhile, this figure is less than 20% in the West African Economic and Monetary Union (WAEMU), which consists of Benin, Burkina Faso, Côte D’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

With many people excluded from the formal financial system, alternative financial products are gaining ground in the region. Mobile money is a nascent but growing payment method that enables the unbanked population – including women, youth and the rural poor – to access services such as savings, loans and payments.

Covid-19 made transacting physically much more difficult and spurred people to use special services and contactless payments. Governments encouraged people to use mobile payments instead of cash to try and limit the spread of the pandemic. As a result, mobile money usage soared. For example, in Ghana, transaction volumes increased 36.8 per cent in 2020 year-on-year while value skyrocketed 81 per cent.Meanwhile, mobile phone operators such as Orange and MTN accelerated plans to bring banking to millions of West Africans, in some cases for the first time.

Growth in West Africa in 2021

More people are starting to pay bills, merchants, and utilities with credit cards and mobile money, online or via Unstructured Supplementary Service Data (USSD). Energy payments make up a major proportion of bill payments processed via mobile money, with electricity companies the top billers (by value transacted) for most mobile money providers. However, other sectors seeing increased digital payments include government and education. In Côte d’Ivoire, for example, most secondary school fees are now paid via mobile money.

In Benin, over 74% of the adult population owned a mobile banking account in 2018, while Togo and Cote d’Ivoire recorded around 70%.

Diasporas around the world increasingly send money home using mobile money. The number of international remittances sent and received via mobile money grew by 48% in 2021, reaching $16 billion (GSMA report  – 2022). The cross-border ecommerce market is still very fragmented and dominated by transfers made via traditional rails, such as correspondent banking.

3. Prominent players

Consumer appetite for new, fast and flexible digital and mobile experiences continues to grow, with a growing number of players in the market.

Major brands in West Africa include:

• Mobile Wallets: Orange Money, MTN Money, Airtel Money, Moov Money, 
• Banks: GTBank, Ecobank, Orabank, Zenith Bank, Polaris Bank, Fidelity Bank, FCMB, UBA, Bloom Bank
• Money Transfer Operators: Proxicash, Juba Express

Within the continent, West Africa is leading in terms of the number of registered mobile money accounts and transaction value. This growth is primarily driven by on-ground agents helping collect cash and digitising it for users to make domestic and international payments. Overall, West Africa has the world’s largest number of mobile services today.

4. Challenges

While consumers have a great deal of choice with multiple payment methods like e-wallets, mobile money accounts and bank accounts, most lack interoperability. There’s a lack of harmonisation among different countries’ regulations, with no connection with each other domestically or to international payment systems.

Complex Regulations

There is a strong need for solution providers in cross-border payments to navigate the complexity in the payments landscape, the high cost and slow speeds of sending money across borders, and the “lack of transparency” by current traditional payments providers.

High Costs

Sub-Saharan Africa remains the most expensive region to send money to, where sending $200 costs an average of 8.2 per cent in the fourth quarter of 2020.

Competition

The arrival of WAVE mobile money in WAEMU with aggressive penetration strategies on price has reinvigorated the market and pushed all the incumbent actors to revise their price policies.

Lack of Interoperability

While consumers and businesses have an increasing choice of payment methods like e-wallets and mobile money accounts, most of these lack interoperability. At the same time, existing payments ecosystems are fragmented and complex, with a lack of harmonisation among different countries’ regulations. This can result in slow, costly and unreliable ways of moving money.

5. Thunes’ capabilities in West Africa

Thunes has built a payments infrastructure that benefits businesses and communities across West Africa and is able to take the region’s nascent mobile money sector to the next level. We achieve this mission very simply – by filling the connectivity gaps.

Using our interoperable infrastructure across various payment platforms, Thunes can help millions of people and businesses in West Africa access affordable international payments, connecting the region with the rest of the world, and enabling intraregional wallet-to-wallet payments between countries.

Thunes network capabilities in West Africa now cover C2C and B2B verticals in 14 countries member states in the Economic Community of West African States (ECOWAS):

• Nigeria, 
• Ghana, 
• Côte d’Ivoire, 
• Senegal, 
• Mali, 
• Burkina Faso, 
• Benin, 
• Togo, 
• Liberia, 
• Sierra Leone, 
• Guinea, 
• Guinea Bissau, 
• Gambia and 
• Niger

Thunes supports bank account deposits, mobile wallet payouts and cash pick-ups, enabling access to 70 million bank accounts and 237 million mobile wallets. 

Thunes’ Network Partners in West Africa include Orange Money, MTN Mobile Money, Airtel Money, Moov Money, and banks across 14 West African countries.

Thunes Commitment to Growth in West Africa

Thunes’ focus is to meet market demand by accelerating its network growth and expansion in West Africa. This means being in more countries, going deeper into each country, adding more partners, and expanding our product offering that facilitates business payments, remittances and collections from and to these markets.

Thunes’ growing interoperable network broadens the reach across African markets for millions of businesses and individuals. More entrepreneurs and consumers connected will be able to benefit from the speed and convenience for intra-Africa payments and international payments beyond Africa.

Globally, Thunes enables C2C and B2B payments to more than 126+ countries (Asia, Europe, Americas, Oceania, Africa), in more than 79 currencies, to more than 400 banking and mobile money partners. 90% of these transactions are carried out in real time and at a lower cost. This represents an adequate response to the difficulties encountered by SMEs and banks in West Africa.

Get in touch with us to discover the potential payments and growth opportunities for your business in Africa today.