Africa is a global leader in mobile money with telecom operators embracing innovative practices that allow customers to not only pay bills but also access services including loans insurance and savings Yet increasingly fintech startups with access to greater funding and banks are trying to permeate the mobile financial services MFS sector and pull some of these customers their way This strategy is dependent on the recognition that the future is digital and that mobile money presents a lucrative opportunity to grow revenue and deposits Banking institutions across Africa currently face numerous challenges including high-cost models and fees that make it unaffordable for low-income segments a high preference for cash over digital transactions and a predisposition towards cooperatives As such Africas retail-banking penetration stands at half the global average for emerging markets at 38 of the gross domestic product according to management consulting firm McKinsey In contrast McKinsey estimates there are 100 million active MFS customers in Africa dealing in transactions worth 21 billion Telecom operators have more customers Africas largest operator MTN has over 170 million users better distribution networks Kenyas Safaricom has over 130 000 mobile money agents can easily spread products given mobile phone diffusion 74 continental penetration as of 2016 not to mention the ease and safety of use in contrast to the paper-heavy processes of banks As the epicenter of mobile money growth there are also diverse services operating in sub-Saharan Africa including Safaricoms M-Pesa MTN Mobile Money Orange Money Tigo Cash or Tigo Pesa Vodafone Cash and Airtel Money Africa has the worlds lowest bank branch penetration North AmericaLatin AmericaMiddle East Emerging AsiaAfrica321717135Branches per 100 000 adults 2015 North AmericaLatin AmericaMiddle East Emerging AsiaAfrica321717135 Data McKinsey Co As such adopting a mobile-first approach will only help banks says Vahid Monadjem the founder of the South African-based payments platform Nomanini Given African banks ranking as second in the world in growth and profitability mobile money presents the opportunity to increase payments income as well as earn interest on increased deposits an income stream which is usually not accessible to telcos Monadjem says Ultimately every dollar of cash that is moved to a digital store of value will land on the balance sheet of a financial institution which can then be lent out multiple times over Monadjem says that in the short run banks and telcos should engage in coopetition with the aim of achieving mutually beneficial results These include lobbying for better regulations increasing shared agent networks improving their distribution capabilities besides enhancing interoperability between wallets Mobile money transactions are diversifying in Africa Airtime top-upP2P transferBill paymentBulk disbursementMerchant paymentInternational remittance589 244118192802Volumes 2016 Airtime top-upP2P transferBill paymentBulk disbursementMerchant paymentInternational remittance589 244118192802 Data GSM Association This mutual cooperation is already evident in Equitel which allows Kenyas Equity Bank customers to ride on Airtels infrastructure to send and receive money Safaricoms M-Shwari loan product was also developed with two banks in Kenya Telcos increasingly aware of these market-specific needs are also innovating around their approaches last week French telecommunications company Orange announced it would apply for a banking license to operate through its mobile money platform in eight West African nations In many African countries lower smartphone prices are driving the digitization of cash and transactions And if banks gradually build smart solutions for these customers Monadjem says they could accelerate their own revenue and increase financial inclusion Without a doubt armed with financing and vast experience around the logistics of handling cash banks can play a massive role in enabling mobile money while boosting their own bottom line Almost half of all Africans will be banked by 2022 11121314151617181920210115230345460 million0115230345 Data McKinsey Co Sign up for the Quartz Africa Weekly Brief the most important and interesting news from across the continent in your inbox