From Feature Phones to Future Finance: How Digital Wallets Are Reshaping Cash Management

In 2023, 1.75 billion mobile money accounts were registered globally, and nearly half of them, 835 million were in sub-Saharan Africa. This region has become synonymous with the digital wallet revolution, showing double-digit year-on-year growth rates.

According to the GSMA’s State of the Industry Report on Mobile Money 2024, USD912 billion of the USD1.4 trillion in global transaction values were processed in sub-Saharan Africa

To understand where digital wallets are heading, we must first examine the conditions that triggered their meteoric rise - and disrupted traditional banking along the way.

Sub-Saharan Africa traditionally has had a limited physical banking infrastructure, creating a critical gap between financial services access and the needs of the population. For example, Uganda, a country with a population of over 45 million people is serviced by fewer than 600 brick-and-mortar branches across 26 banks, with fewer than 1,000 ATMs and about 5,000 point-of-sale terminals.

Even in this tech-savvy nation where 75% of people are under the age of 35, accessing basic banking services remains a challenge - especially for those living outside major cities. Many people in rural areas have to travel 20km or more to get to an ATM. This raises a pivotal question: how many of these individuals can realistically and optimally engage with traditional banking?

And so we had a confluence of factors: a largely unbanked population, financial products that were not fit for purpose for people in rural areas, and a scarcity of service points. People wanted convenience and accessibility, and banks were not addressing their needs. This gap created fertile ground for digital wallets to flourish.

The arrival of digital wallets ushered in an era of unprecedented game changing financial access: a secure store of value on your mobile phone (feature phone or smartphone) which you could access 24/7. The Know Your Customer (KYC) requirements were also not as stringent as they were with the banks due to less stringent regulation afforded MNOs. You could simply use your national ID to open a digital wallet and start transacting.

This simplicity and ease of access fuelled rapid adoption, building an entire digital financial ecosystem. What started as a tool for the unbanked quickly became indispensable for personal and business transactions alike. Today, digital wallets in Africa are used not only for peer-to-peer payments but also for salaries, remittances, and soon, business-to-business (B2B) transactions.

Whilst cash is still king on the continent, it is no longer the dictator of economic activity and this trend is exponentially becoming the norm.

According to the GSMA’s The Mobile Economy 2024 report, smartphone penetration in sub-Saharan Africa will be 88% by 2030. That tells us that banking will not be a place you go to, but rather a thing you do on the phone.  Financial institutions cannot ignore the mobile first evolution if there are serious about their sustainability as going concerns.

Many members of the African diaspora are prefer sending remittances home via the digital wallet, bypassing the traditional bank transfers with associated higher costs. Salaries, too, are now being paid into digital wallets – making them the de facto financial platform for many individuals. With regulators not yet having standard metrices for setting limits on digital wallet transaction values, the stage is set for digital wallets to support more complex transactions including business to business payments

The next evolution of digital wallets will focus on real-time cross-border payments for B2B transactions, which mobile wallets already offer. This capability will allow the corporate treasurer – who has been managing multiple currency accounts in multiple countries, and who has had to wait for deposits into those accounts to be reported via their treasury management system – to instantly interact with mobile money wallets in more than 70 corridors. This will be transformational for the corporate treasurer and the economic supply chain they support.

This transformation also unlocks the potential for predictive AI-driven financial services. Imagine retail banks offering loans before customers even request them on a personalised level, or businesses using AI to optimize their working capital cycles juxtaposed by just in time principles for cash forecasting. With access to advanced data analytics, companies will be able to manage liquidity more efficiently and automate cash flow processes in real time. The advent of this capability will herald a phase where treasurers with their banking partners become more strategic advisors in driving the growth agenda of the corporates they serve and support.

Absa’s corporate clients operate not only in B2B environments, but also in the more complex Partner-to-Partner-to-Partner (P2P2P) ecosystem. Historically banks have confined themselves in the ‘safe’ space of trust accounts and settlements within the Mobile Money ecosystem, but digital transactions empowered by native API technology and emerging AI/ML algorithms are opening up new possibilities.  With the right imagination, financial institutions can move beyond these legacy models, building more dynamic and responsive services around the digital wallet ecosystem.

What began as a practical solution for rural populations using feature phones has evolved into a sophisticated platform driving financial innovation across Africa. As digital wallets mature, they are poised to reshape not just personal finance but also corporate cash management in unprecedented ways.

This revolution is not just about digitising money – it’s about transforming how we think about finance. Financial services are no longer restricted by geography or legacy systems but are becoming embedded in everyday life through digital wallets. Banks that recognise this shift and align their strategies accordingly will be the ones to thrive in this new era of mobile-first finance.