Fifteen years ago, the process of sending money across African borders was fraught with challenges. Remittances often took days to be received, with high fees consuming a significant portion of the transferred amount. However, the landscape began to change with the introduction of mobile money—a movement that originated not in traditional tech hubs but in the vibrant streets and markets of Nairobi.
The launch of M-Pesa in 2007 marked a pivotal moment in this transformation. It introduced the concept of sending money via mobile phones without the need for a bank account, fundamentally altering the way financial transactions were conducted across the continent. Today, mobile money serves as an essential component of daily commerce in nations including Kenya and Ghana, facilitating various transactions such as paying school fees, purchasing groceries, and managing small businesses—all through a basic mobile device.
The success of mobile money stems from its ability to address local needs in a localized manner. Brick-and-mortar banks often proved to be distant and costly for many in sub-Saharan Africa, yet the adoption of mobile phones surged. Solutions like M-Pesa in Kenya, MTN Mobile Money in Ghana, and Airtel Money in Uganda enabled users to store value digitally and make instant transfers. By 2023, Africa represented an impressive 70% of the global $1.26 trillion in mobile money transactions, highlighting the achievement of financial inclusion. Yet, despite its profound impact, mobile money does face certain limitations. Cross-provider and cross-border transactions can still incur high costs and delays. Each transfer must navigate through telecom companies and governmental regulations, creating potential bottlenecks. Furthermore, existing mobile money wallets are not ideally suited for cross-border investments, decentralized lending, or peer-to-peer global trade.
This is where the concept of Web3 becomes significant. Web3 refers to the next evolution of the internet, characterized by blockchain technology, decentralized frameworks, and user ownership. By allowing individuals to send, store, and trade value independently—without reliance on centralized institutions like banks or telecom companies—Web3 represents a substantial shift in the financial landscape.
In financial terms, Web3 is embodied in decentralized finance (DeFi), which facilitates activities such as lending, borrowing, saving, and trading through smart contracts deployed on public blockchains. These assets can include a range of cryptocurrencies, stablecoins pegged to traditional currencies, and even tokenized commodities and stocks. For African nations, Web3 introduces myriad possibilities that transcend the current capabilities of mobile money: it can facilitate instant cross-border payments with minimal fees, provide global earning potential for freelancers using stablecoins, and offer decentralized lending opportunities that are not bound to local credit histories or banking systems. For example, a trader in Lagos could swiftly pay a supplier in Accra using a stablecoin pegged to the dollar—eliminating the hassle of bank visits, currency exchange delays, and telecom fees.
Africa has demonstrated a unique ability to leapfrog past outdated infrastructure to embrace innovative technologies. Just as mobile phones replaced landline telephones and mobile money circumvented traditional banking, Web3 could potentially bypass some constraints of existing mobile money systems. Several elements contribute to Africa’s potential for Web3 adoption, including widespread mobile access, a younger and tech-savvy demographic, a culture of cross-border trade that necessitates agile payment solutions, and economic uncertainties that drive individuals toward stable digital assets. Countries like Nigeria, Kenya, and South Africa are already making their mark, ranking among the top 20 for cryptocurrency adoption globally according to Chainalysis’ 2024 report. Emerging startups such as Yellow Card and Kotani Pay are working to bridge the gap between traditional financial systems and the new digital landscape.
However, the road ahead for Web3 is not without its obstacles. Many African governments have approached cryptocurrencies with caution, often implementing bans or imposing stringent regulations. While stablecoins offer some protection from volatility, much of the cryptocurrency landscape remains unpredictable. Additionally, the reliance on internet access for blockchain transactions poses a challenge, particularly in rural areas with poor connectivity. Understanding how to navigate the complexities of Web3 safely also requires time and education, and scams continue to pose a significant threat. These challenges suggest that while Web3 might not be poised to completely replace mobile money in the immediate future, it is likely to exist alongside it in hybrid forms for the foreseeable future.
The most plausible short-term scenario involves a blending of mobile money and Web3, creating systems where USSD-based mobile wallets can hold stablecoins, or crypto platforms enable withdrawals in local currency via mobile money agents. Initiatives like Celo are already testing blockchain payment solutions compatible with basic feature phones. The objective is to make blockchain technology as accessible as traditional USSD, avoiding a reliance on high-end smartphones and constant internet connections. Within this hybrid landscape, mobile money agents could evolve into gateways for Web3, empowering users to buy, sell, and transfer digital assets alongside their current mobile finance services.
Africa’s evolution from cash-centric economies to mobile money networks has set a global standard for local innovation. The transition from mobile money to Web3, while potentially transformative, may not follow the same path. Rather, it is expected to be more complex and interconnected globally. If mobile money emerged as Africa’s solution to financial exclusion in the 2000s, Web3 could potentially serve as the gateway to enhanced global financial participation in the ensuing decades. The success of this initiative will depend on fostering trust, implementing intelligent regulations, and ensuring that the benefits of these advancements reach not just the technology elite but also everyday market traders, students, and farmers.
The revolution began with a simple text message. The next chapter may very well be written in code.
