Huawei, Kunlun and China's tech giants drive a quiet revolution in Africa's fintech with mobile payment apps and wallets

A digital revolution is quietly under way in Africa, as dozens of electronic wallets have sprouted on the continent for users to transfer money digitally through their smartphones, some of them powered by Chinese technology.

One of the biggest is M-Pesa, a mobile money service established in 2007 by the Kenyan phone company Safaricom, using an enterprise solution provided by Huawei Technologies. The service now transacts more than most banks in Kenya. Huawei also powers Ethiopia's TeleBirr, launched in May by the former state-owned monopoly Ethio Telecom.

M-Pesa and TeleBirr underscore Huawei's push into Africa's telecommunications market, where it has expanded beyond building the infrastructure of telephony into a broad array of enterprise solutions and services, including providing its network customers with the technology to run mobile payment applications in as many as 19 countries. The diversification comes as Huawei's core business of building phone networks comes under increasing scrutiny - and objection - by the United States and its global allies, in an escalation of the US-China technology rivalry.

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"Mobile phone companies like Safaricom stepped in to fill the void" left by the large African banks - mostly counting Western shareholders - who do not want to have anything to do with the average person in the street, preferring the genteel, secure world of corporate banking, "and now they are eating the banks' lunches," said Peter Wanyonyi, a Kenyan technology analyst based in Waikato, New Zealand.

Huawei's store in the Menlyn Park Shopping Center in Pretoria, South Africa, on August 12, 2020. Photo: Bloomberg alt=Huawei's store in the Menlyn Park Shopping Center in Pretoria, South Africa, on August 12, 2020. Photo: Bloomberg

Huawei's push to power Africa's fintech development underscores its pivot as sales of its smartphones and telecommunications gear have been impacted by US sanctions, causing the Chinese company to post its worst interim sales decline in decades. Enterprise solution was the sole growth segment, reporting an increase of 18.2 per cent in the first half.

"Intelligent finance itself has a market valued at several hundreds of billions of dollars, but the potential is bigger because there will be cross-sector opportunities," Jason Cao, president of Huawei's global financial services business unit, said during a June interview in Shanghai with South China Morning Post. "Digitalised financial services have already penetrated into various commercial fields, and a cross-industry, full-scenario ecosystem can be built by us to serve the clients."

Huawei's revenue by geographical regions. Source: Huawei Annual Reports alt=Huawei's revenue by geographical regions. Source: Huawei Annual Reports

Huawei, based in the southern Chinese technopolis of Shenzhen, dubbed China's Silicon Valley, is not the only company to be building mobile wallets in Africa.

Zhou Yahui, the billionaire founder of Beijing Kunlun Technology and the previous owner of the popular gay dating app Grindr, is also behind the Nigerian e-commerce and payment company OPay, developed by Kunlun's Opera web-browser unit.

OPay, founded in 2018, counts Softbank, Sequoia Capital, Meituan and Bertelsmann Asia Investments as among its Series-B investors, in a recent US$400 million fundraising that values the company at US$1.5 billion, according to data compiled by Crunchbase.

Opera, based in the Norwegian capital of Oslo, is taking a page from China's fintech playbook to Kenya, where it is developing a platform comprising OKash, OPesa and Credit Hela to offer loans through mobile phone apps typically without providing any form of security for the lender and often without requiring a credit history from the recipient.

An M-Pesa shop in Nairobi, on May 12, 2009. Photo: Reuters alt=An M-Pesa shop in Nairobi, on May 12, 2009. Photo: Reuters

The microlending market has also attracted Silicon Valley-based tech investors such as Tala and Branch. But there are additionally hundreds of locally and foreign-funded fintech companies targeting African customers who are unserved by traditional banks.

It is an industry that has also attracted Shenzhen-based Transsion - Africa's largest seller of smartphones - to invest in PalmPay, which launched in 2019 with US$40 million from Transsion, NetEase and MediaTek. The fintech app, which operates in Nigeria and Ghana, is pre-installed on Transsion's mobile phone brands Tecno, Infinix and Itel.

Alipay, operated by the Ant Group affiliate of this newspaper's owner, Alibaba Group Holding, is powering VodaPay, a super app with 70 mini programme developers developed by South Africa's Vodacom that promises to "drive financial inclusion and economic growth."

"The attraction in Africa is the still large unbanked population," said Dobek Pater, business development director at the market research firm Africa Analysis, adding that Huawei and other Chinese companies are focusing on digital finance because they are less adverse to enter emerging markets compared to their Western competitors. "They are willing to take on greater risk for greater reward."

A phone assembly in Ethiopia producing cellular phones that carry the brands of Transsion Holdings, the largest mobile phone supplier in Africa. Photo: Handout alt=A phone assembly in Ethiopia producing cellular phones that carry the brands of Transsion Holdings, the largest mobile phone supplier in Africa. Photo: Handout

Like the prepaid SIM cards that popularised cellular telecommunications for millions of Africans who cannot afford costly monthly accounts, mobile payment wallets make payments and e-banking available to wide swathes of the population. There is even a simpler version that works on 2G telecommunications networks instead of smartphones.

"It means one can send remittances or have access to banking options from a feature phone via text messages, instead of a smartphone," said Henry Tugendhat, a senior policy analyst at the US Institute of Peace. "There are still large swathes of rural Africa with 2G telecoms infrastructure, where the poorest may have feature phones, but not smartphones." "This is different from WeChat's payment service or Apple Pay because those only function over the mobile internet," which requires 3G infrastructure or above, he said.

The M-Pesa mobile payment service provided by Safaricom, in Nairobi on May 12, 2009. Photo: Reuters alt=The M-Pesa mobile payment service provided by Safaricom, in Nairobi on May 12, 2009. Photo: Reuters

Huawei's mobile wallet partners in Africa Vodafone, Vodacom and Teasy Mobile are available in 19 countries including Kenya, Ghana, Lesotho, Nigeria, Tanzania, Zimbabwe and the Democratic Republic of Congo.

He said mobile money has proved to be an excellent solution in bringing large segments of the lower-income population into the formal banking environment, with the possibility of offering a range of products to them, such as insurance, loans and funeral cover.

This is similar to what prepaid mobile services did for closing the telecoms divide. Pater said this presents a very good investment and growth opportunity, not seen on this scale in other global regions with more developed financial sectors.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.