To most people in under-developed and developing countries, social media and mobile instant messaging (MIM) platforms are becoming a big deal as they progressively make communication easier via text, voice or video.
Interestingly, there’s no need for in-depth knowledge of technology to be able to use instant messaging platforms. More companies producing smart feature phones for Africans mean more accessible mobile devices. The MTN Smart T is an example.
Suggested read: Review of the $22 MTN Smart T ‘smart’ feature phone
Aside from connecting people, another industry that the increasing penetration of mobile phone has the potential to disrupt is the financial sector. And this has been witnessed in countries like Kenya and China.
As of now, mobile technology is making an impact in the African financial sector but it appears the sector is still underserved as financial inclusion penetration doesn’t reflect the level of mobile connectivity.
According to Global Findex, only 34% of the adult population in the Sub-Saharan Africa region has a bank account whereas 41% of internet users in Nigeria have installed WhatsApp which is one of the top MIM platforms in Africa.
Considering that the penetration of IM platforms is higher than that of financial accounts ownership, can these platforms be the channel to bring more Africans into the financial space?
As it is, Nigerian commercial banks are currently using IM platforms to offer financial services to people: the likes of UBA’s Leo and Diamond Bank’s Ada among others. This is irrespective of the past privacy-related issues that Facebook has been involved in.
And by 2020, the leading global social media platform — Facebook — will be launching its cryptocurrency platform Libra which will be accessible through its IM platforms, Messenger and WhatsApp.
When Calibra — the digital currency wallet — eventually launches, one will need a government-issued ID as identity verification to sign up for an account. And in Africa for instance, the likes of Nigeria, Ghana, South Africa among others all have national identification systems.
As national ID is probably the only government-issued ID that doesn’t come at a cost, developing countries with no identity system are likely going to be compelled to own.
Is social media the right channel?
According to Facebook, Libra is going to be a financial infrastructure that will empower billions of people.
Considering that both messaging platforms, especially WhatsApp, have garnered some level of penetration, it is expected that this move will have a great impact on Africa’s financial landscape.
WhatsApp can also be said to be one of the driving forces of internet uptake in Africa. Hence, it has the potential of bringing more people into the formal financial sector with ease.
As of 2018, WhatsApp users sent about 65 billion messages daily, from about 50 billion in 2014. Whereas 18.7 billion were sent per day via short message service (SMS) in 2017 which is lower than that of 2014 at 20 billion messages per day. ()
Paul Lee, Technology, Media & Telecommunications Global Head of Research at Deloitte in a video said the gap between the volume of messages sent over IM and SMS is expected to widen over the year with IM increasing while that of SMS, decreasing.
Suggested Read: How Banks leverage on social media platforms in Nigeria
The death of cash-based traditional remittance service providers
PricewaterhouseCoopers (PwC) in a recent report revealed that Nigerian in the diaspora sent an estimated US$25 billion (₦9 trillion) in remittances to the country in 2018. And as it is, Libra has the potential to offer remittance services.
For Facebook, moving money globally should be easy and cost-effective as sending text messages. An easier and more cost-effective means of sending money across borders can be likened to an increase in remittance value and volume.
Its potential is enormous considering that the Libra Blockchain — the infrastructure which Libra is built on — is open source and will allow anyone to build on it.
Commenting on Libra, Azimo founder and CEO, Michael Kent says: “If working on top of Libra makes our services faster, cheaper and more secure. Then we will adopt it.”
“Customers don’t really care whether it’s cryptocurrency or not. They just want their financial services fast, cheap and secured.”
Michael thinks it will be more difficult for more traditional cash-based remittance services providers to survive in the world of Libra.
Disrupting payment, and maybe cryptocurrency
Going by what Facebook says Libra is, users should be able to conveniently make payment with the system. And this is definitely going to add value to merchants on social media.
According to a survey on social media survey, 45% of respondents are most likely to use Libra while 27% are unlike. And 28% don’t care about the payment system.
POLL: As a merchant selling on social media, how likely are you to accept #Libra, Facebook’s digital coin as payment?
Kindly vote and RT.
— Techpoint Africa (@Techpointdotng) June 25, 2019
With the above result, it can be deduced that Libra is likely going to play an interesting role for merchants on social media. And companies that allow merchants accept payments on social media will feel this heat.
Ade (not real name) is a co-founder of one of such companies in Nigeria who believes Libra has a couple of hurdles to cross. “Libra is based on blockchain implementation which isn’t particularly decentralised,” he says.
In the same vein, Azimo founder and CEO, Michael Kent says “It is unclear how decentralised Libra is at the moment.” He further affirms that Lbra could be an interesting use-case as well as the killer app for cryptocurrency.
For Luno, Libra is definitely not one of the numerous cryptocurrency hypes of the past. Luno’s views align with Michael’s point that it’s going to be a game changer.
Luno believes that adding Libra to all Facebook products will instantly bring billions of people closer to the crypto realm.
The other expected hurdle for Libra is regulations. It is believed that Facebook will need to get both the banks and the government on its side which Ade claims the social media giant is always having trouble with.
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