Why are mobile payments and cryptocurrencies thriving in the absence of banks?

Written by: Diane Shi

Africa's payment market exhibits distinct characteristics, featuring the highest mobile payment penetration rate globally and the fastest adoption rate of cryptocurrencies. This is not a coincidence at the market level, but an inevitable outcome of the long-term evolution of macroeconomic structures.

This article will analyze the two deep structural drivers behind this inevitability: (1) Africa's economy relies heavily on resource exports, trade circulation, and remittances, creating substantial demand for cross-border settlements and remittances; (2) Africa's local financial infrastructure development is lagging, suffering from international banks' de-risking and poor foreign exchange management, resulting in a long-term absence of commercial banks and enduring inflationary pressures.

These two forces together have created a vacuum that has allowed mobile payments and cryptocurrencies to thrive: mobile payment platforms have replaced banks as the everyday payment channels, while cryptocurrencies have assumed the role of local fiat currencies or previous dollars in emerging economies, serving as both a value storage tool against local currency depreciation and a low-cost medium for cross-border exchange.

On this continent, the critical dividing line is the Sahara Desert: the area north of the Sahara integrates into the Middle East and North Africa framework anchored by oil, aligning with the Middle East; while Sub-Saharan Africa (SSA) faces severe dollar shortages and a fragmented currency system, giving birth to a massive market with a natural demand for mobile payments and cryptocurrencies. SSA countries like Nigeria, Kenya, and South Africa rank among the global leaders in mobile payment and cryptocurrency adoption rates.

1 Africa's Macroeconomic Landscape: A Large, Young, Yet Commodity-Dependent Primary Economy

1.1 Population Structure

By 2025, Africa's population is expected to reach approximately 1.55 billion, accounting for about 19% of the global population. It is the youngest continent, with a median age of only 19, and it is also the fastest-growing continent, with an annual growth rate of about 2%, which other continents find hard to reach.

By 2100, Africa's population is projected to triple to around 3.81 billion, constituting 37% of the global population. In stark contrast, Asia's population is expected to peak in the middle of this century and then decline, while Europe and Latin America face absolute shrinkage, with only Africa experiencing substantial growth throughout the century (see Figure 1 and Figure 2).

This demographic trend has far-reaching implications for payment infrastructure. With traditional banking coverage still relatively low, a large number of young, urbanized, mobile-native populations are entering the labor market and consumer economy on a large scale. Consequently, the demand for convenient, low-cost financial services (including payments, savings, and credit) will only become more pronounced.

1.2 Resource Endowment and Industrial Structure

Africa possesses an extremely rich array of natural resources. According to the OPEC annual statistical bulletin, as of 2024, the African continent has proven oil reserves of about 119.4 billion barrels, accounting for approximately 7.6% of the global total, with the largest reserves concentrated in Libya, Nigeria, Algeria, and Angola. Aside from hydrocarbons, Africa's mineral resources also hold significant global importance, dominating in several categories: the continent is the world's most important diamond-producing area, holding about 49% of the world’s cobalt reserves, and as the absolute source of platinum group metals (PGMs), with South Africa alone controlling about 78% of global PGM reserves. These resource endowments position Africa as a critical node in the global commodities supply chain.

However, most of this wealth is still extracted and exported in raw material form, with almost no downstream processing or value-added segments. Meanwhile, Africa's local manufacturing and agriculture are underdeveloped, and infrastructure is severely lacking, continuing to rely on imports for products such as refined oil and processed food. Such an "import and export on both ends" economic structure locks the entire continent into a trade reliance pattern that will be discussed next.

1.3 Trade Dependence and Remittance Flows

Africa's economy is deeply intertwined with global trade and overseas remittances. In 2023, Africa's cross-border goods exports and imports reached $604.5 billion and $684.5 billion, respectively, while remittance inflows totaled $52.16 billion. As a benchmark, Africa's GDP across its entirety in 2023 was approximately $2.96 trillion. These two pillars of trade and remittances are crucially important in Africa's economic structure and have generated substantial demand for B2B cross-border trade settlement and C2C cross-border remittances.

Cross-border trade is a significant pillar of Africa's economy, but reliance on the export structure of commodities and long-standing trade deficits render the African economy highly sensitive to global macro cycles. In 2023, Africa's total goods exports amounted to $604.5 billion (a year-on-year decline of 15.1%), while imports totaled $684.5 billion (a year-on-year decline of 1.6%), resulting in a trade deficit of about $80 billion (see Figure 3). Over the past decade, Africa has shown extreme sensitivity to fluctuations in the global commodities cycle. The oil price crash of 2015–2016 pushed Africa's trade volume to a twenty-year low, with resource-dependent economies (such as oil-exporting Nigeria and Angola) sinking into stagnation, while non-resource-dependent economies maintained growth rates of 7%–8%, leading to a significant divergence between the two. The impact of the COVID-19 pandemic in 2020 triggered another wave of collapse: global commodity prices plummeted, and Africa's GDP growth rate fell to -2%, followed by a V-shaped rebound in 2021. Recently, during 2022–2023, Africa's exports briefly surged due to skyrocketing commodity prices triggered by the Russia-Ukraine conflict, but at the same time, the aggressive interest rate hikes by the Federal Reserve raised the dollar and tightened global liquidity, causing the entire African continent to once again suffer from severe imported inflation and currency depreciation.

Africa's trade partner structure has changed significantly over the past decade (see Figure 4). Asia, led by China and India, has surpassed Europe as Africa's largest source of imports—the proportion of imports from Asia rose from 28% in 2010 to 36% in 2023, while Europe's share fell from 38% to 32%. On the export side, Europe remains the largest destination with a share of 39%, but Asia's share has grown from 24% to 28%, and the Middle East has surged from 3% to 11%. North America's roles at both ends of the trade spectrum have contracted. These changes reflect the deepening of the China-Africa commodity trade corridor and the increasing importance of Gulf countries as energy buyers and investment partners.

Beyond intercontinental trade, "Intra-Africa Trade" among African nations is also growing rapidly, but barriers such as differing currencies and languages between countries remain bottlenecks that need to be overcome. In 2023, the total trade between African countries amounted to $192.2 billion, growing at 3.8%. However, intra-African trade only accounted for 18% of Africa's total exports; in comparison, intra-European trade accounts for 70% of its total exports, and intra-Asian trade accounts for 52%. This reflects that fragmented tariffs, non-convertibility of currencies, and weak cross-border infrastructure are ongoing obstacles to the growth of intra-African trade. Against this backdrop, the African Continental Free Trade Area (AfCFTA) began operations in 2021, intending to raise intra-African trade volume by 52% upon full implementation, but the progress of this plan has been exceedingly slow.

Remittances represent another lifeline for Africa's economy and are a source of massive C2C payment demand. According to World Bank data, remittance inflows to Africa reached $52.2 billion in 2023. The top five remittance corridors are Saudi Arabia → Egypt, UAE → Egypt, USA → Nigeria, Kuwait → Egypt, and France → Morocco. The African labor force is exported to the Gulf region, North America, and Europe, forming a continuous flow of income back to households. These corridors constitute one of the largest sources of demand for cross-border C2C remittances and also illustrate the pain points in traditional financial systems regarding high costs, lengthy processing times, and lack of transparency in remittance progress, which we will focus on in the next section.

2 Mismatch between Demand for Foreign Trade Remittances and a Lagging Financial System

2.1 Low Banking Coverage and a Huge Unbanked Population Gap

Africa's formal financial system can only cover a small portion of the population. According to the World Bank's 2021-2022 Global Findex database, only 49% of adults in Sub-Saharan Africa have financial accounts; by 2024, this percentage is expected to rise to 58%, yet it will still remain among the lowest globally. Besides low coverage, the density of bank branches in Africa is also lagging. Financial accessibility surveys by the International Monetary Fund show that Kenya has only 4.4 bank branches per 100,000 adults, Morocco has 22.2, and even South Africa, which boasts the most developed banking system in Africa, only has 38.7, all far below the global average. As a result, there is substantial unmet demand for fundamental financial services such as payments, savings, credit, and insurance.

2.2 International De-risking and Exit of Correspondent Banks

A second major challenge faced by Africa arises from the withdrawal of the international financial system itself. Due to concerns over compliance risks related to anti-money laundering (AML) and customer due diligence (KYC), along with local realities like a lack of formal identification documents, no fixed addresses, incomplete tax records, and a high cash economy ratio, major global banks have initiated a wave of de-risking. Since 2016, correspondent banking relationships have contracted sharply. According to SWIFT data, South Africa has lost over 10% of its overseas correspondent banks, while Angola's drop has reached 37%. This retreat has directly increased the costs of legitimate cross-border transactions and pushed smaller African financial institutions out of the global financial system.

2.3 Poor Foreign Exchange Management and Chronic Inflation

The vulnerability of the currency system further amplifies the structural deficiencies mentioned above. Due to fiscal deficits and a weak tax base, many African central banks have to rely on issuing currency to finance government expenditures, leading to sustained imported inflation. The prices of food, fuel, and raw materials for finished products have surged due to currency depreciation. Meanwhile, deep underdevelopment of capital markets, a highly concentrated banking system, and historical shortcomings in central bank independence have resulted in ineffective transmission mechanisms for monetary policy, making it difficult for interest rate hikes to effectively curb inflation or stabilize exchange rates. By 2024, the overall inflation rate in Africa hit 20.1%, the highest among major global regions, severely eroding the real value of local currency savings.

2.4 Consequence: Cash Domination and Failures in the Payment System

The triad of banking exclusion, de-risking, and currency instability has produced obvious consequences. The vast majority of Africans still rely on cash for daily transactions; the remittance costs in Sub-Saharan Africa are the highest in the world, reaching an average transfer fee of 8.46%, according to the World Bank's Global Remittance Pricing Report for the third quarter of 2025; the general public also lacks effective value storage tools to combat inflation. The banking system is failing across three dimensions: ease of access, affordability, and currency stability, creating a market vacuum that is being rapidly filled by emerging payment channels and cryptocurrencies.

3 In the Vacuum Created by the Traditional Financial System, Mobile Payments and Cryptocurrencies Flourish

In the gap formed by the absence of a banking system, under the pressure of severe inflation and currency depreciation, Africa has developed the world's most dynamic mobile money and cryptocurrency markets. The emergence of these alternative payment channels is not due to choice, but necessity—they address real issues that the banking system is unable to tackle: accessibility, affordability, and stability.

3.1 Mobile Payments: Africa Leading Globally

Africa accounts for a substantial share of global mobile money transactions. According to data from the 2025 Global Findex database, approximately 40% of adults in Sub-Saharan Africa use mobile money accounts as their primary (or sole) formal financial service. Kenya's M-Pesa platform exemplifies this model: it leverages ubiquitous USSD technology (usable via basic mobile phone keypads) to build a network of millions of offline agents, and with comprehensive mobile signal coverage, it captures 90.8% of the Kenyan mobile payment market and has successfully expanded to seven other African countries including Tanzania, Ghana, and Egypt. This offline agent-based, low-tech threshold architecture has proven to be far more scalable and inclusive than the traditional branch-based banking model, amassing a large user base across both urban and rural areas in Africa.

3.2 Cryptocurrency Widely Adopted Across the African Continent

The adoption rate of cryptocurrencies in Africa is leading globally and continues to rise sharply. In the Middle East and North Africa region, the total on-chain value received from July 2024 to June 2025 is approximately $600 billion; during the same period, Sub-Saharan Africa recorded $200 billion, with a year-on-year growth rate of a staggering 52%, primarily driven by retail users and concentrated in a few countries (Nigeria, South Africa, Ethiopia, Kenya). Cryptocurrencies effectively meet the local demand of enterprises and individuals in Africa for value storage against inflation and low-cost cross-border settlement, which are two needs that both mobile money and formal banking systems fail to adequately address.

4 Heterogeneity Within the African Continent

4.1 Why Understanding the Internal Disparities in the African Continent is Crucial

Africa's 54 countries span 42 different currency systems and belong to multiple linguistic groups, including Francophone, Anglophone, Arabophone, Lusophone, and Hispanophone. This division of language and currency is not just a difference at the level of cultural symbols, but also deeply manifests itself in the realms of cross-border trade, financial flows, and regulatory systems: payment networks are segmented, regulatory frameworks are independent, and market opportunities are thus highly fragmented. Therefore, while building an overall understanding of the macroeconomic environment in the African continent, it is crucial to also grasp the disparities in cultural, regulatory, and financial systems across its internal sub-regions.

4.2 Divided by the Sahara Desert: MENA vs. SSA

The most common analytical framework currently divides Africa into two systems, MENA (Middle East and North Africa) and SSA (Sub-Saharan Africa), based on the Sahara Desert's geographic boundaries.

North Africa is culturally, institutionally, and economically highly integrated with the Arab world, with its economy centered around oil and gas resources, deeply embedded in the global energy market. Correspondingly, its financial system and policy framework operate predominantly within the MENA ecosystem, with a relatively mature banking system and lower levels of financial exclusion.

In contrast, Sub-Saharan Africa is largely outside this system. It is precisely this market, which has long faced profound issues of underdeveloped financial systems, dollar shortages, and currency instability, that has driven the explosive growth of crypto and mobile payments. Currently, SSA accounts for nearly 60% of the global mobile payment transaction volume and is also the fastest-growing region for cryptocurrency adoption.

4.3 Five-Region Framework: Divergence in Population, Economy, and Fintech Ecosystem

Further segmentation divides Africa into five major regions, showing significant differences in macroeconomic characteristics. Among them, North Africa and Southern Africa enjoy the highest per capita GDP, while West Africa and Central Africa demonstrate relatively lower development levels. East Africa, however, has the lowest per capita income. Yet, economic growth rates are inversely related to wealth levels: East Africa grows the fastest, followed by Central Africa, North Africa, West Africa, and Southern Africa.

The pattern of cryptocurrency adoption also reflects similar characteristics. Nigeria alone (located in West Africa) contributes the bulk of SSA's crypto transaction volume; meanwhile, East Africa, South Africa, and North Africa also show relatively high adoption rates for cryptocurrencies. In contrast, Central Africa and the broader West African region remain in the early stages of market development. This divergence essentially reflects the differences in the levels of financial exclusion, dollar shortage pressures, and regulatory environments across regions.

5 The Issues of "Dollarization" and "Dollar Shortage" Behind the Payment Market in Sub-Saharan Africa

5.1 Dollarization in Sub-Saharan Africa

Economies in Sub-Saharan Africa show deep characteristics of dollarization, far exceeding most other regions globally. The ratios of dollar deposits and dollar loans are important proxy indicators for measuring dollarization levels: in Nigeria, dollar deposits once accounted for 40% of total deposits, and over 80% of external debts were denominated in dollars; in Ghana, dollar deposits also reached a high level of 20% to 30%. This dollarization is not accidental, but a manifestation of rational economic behavior in the face of long-term currency instability.

5.2 Three Structural Drivers of Dollarization

The dollarization in Sub-Saharan Africa arises from three distinct economic pressures.

First, value storage: Fiscal deficits and external imbalances compel central banks to increase currency issuance, leading to continued depreciation of local currencies, while the dollar offers a stable measure of value.

Second, medium of exchange: Commodity prices (oil, minerals, food) are globally priced in dollars, and even if the trade between two African countries involves both nations, it is often settled in dollars—because the dollar is more stable than any single local currency.

Third, financing channels: Shallow local capital markets mean that businesses and governments must borrow in dollars from international creditors; when dollar debts become too large relative to dollar incomes, exchange rate risk becomes extremely acute, prompting more funds to turn to dollar deposits.

5.3 Causes of the Dollar Shortage

The real pain point of the current payment market in Sub-Saharan Africa is the shortage of dollars. Limited export earning capacity (commodity dependence, weak manufacturing exports), coupled with huge trade deficits and debt servicing pressures, has continually depleted government foreign exchange reserves. Consequently, central banks can only ration official foreign exchange supplies through administrative controls. This scarcity has given rise to a parallel black market, where dollars trade at a substantial premium—sometimes exceeding official rates by 50% to 100%. Residents and businesses unable to obtain foreign exchange through official channels turn to informal ones: global remittance companies like Western Union, informal currency exchange entities, as well as an increasing number of stablecoins and cryptocurrencies. The gap between the official and parallel market exchange rates is precisely the opening through which alternative payment systems can penetrate.

5.4 Why Cryptocurrencies Thrive in This Vacuum

Stablecoins and other cryptocurrencies fulfill three key functions missing from the formal banking system. They circumvent capital controls, providing access to acquire dollars in the parallel market; they carry out cross-border transactions at lower costs than banks and remittance corridors; and they offer a globally liquid, value storage tool not impacted by local currency risks. Thus, most cryptocurrency adoption in Sub-Saharan Africa is driven by retail users, with small transaction amounts. As shown in Figure 11, compared to other global regions, Sub-Saharan Africa has a higher share of transfers in the range of $1,000 to $10,000, reflecting the liquidity of small remittances, informal business trade settlements, and personal savings. Nigeria dominates the region, accounting for about 45% of the on-chain transaction volume in Sub-Saharan Africa (as shown in Figure 12), but Kenya, South Africa, and Ethiopia are also important regional hubs.

5.5 Attempts at Dollar De-dollarization and Their Structural Limitations

African policymakers and regional institutions have attempted to decrease reliance on the dollar. The Pan-African Payment and Settlement System (PAPSS) aims to settle intra-African trade in local currencies and reduce foreign exchange costs; the planned "Eco" currency zone in West Africa seeks to achieve stability through a monetary union; and various central banks have adopted aggressive interest rate hikes and capital control measures. However, all of these efforts face a fundamental limitation: the structural trade dependence of Sub-Saharan Africa. As long as this continent's imports exceed exports, foreign accounts remain in deficit, and most foreign exchange revenues come from commodities, the demand for dollars will continue to exceed supply. De-dollarization requires industrialization and trade rebalancing, both of which are decades-long transformation processes that policy alone cannot achieve. In the meantime, mobile money and cryptocurrencies will continue to play important roles in filling the gaps left by the traditional financial system.

Conclusion

Africa's outstanding performance in the adoption of mobile money and cryptocurrencies is not a coincidence of the market, but an inevitability of macroeconomics.

The continent's youthful demographic structure, abundant natural resources, and deep integration into the global commodities market have generated massive cross-border payment flows. However, its weak financial system, long-standing currency instability, and severe dollar shortages make the formal banking system utterly unable to meet this demand.

Mobile money addresses domestic payment issues; cryptocurrencies are addressing cross-border value transfer and inflation hedging issues. These are not niche applications or speculative holdings, but are critical financial infrastructures that fill the vacuum left by structural economic constraints. The key point is that these constraints are not cyclical but are rooted in Africa's resource dependency, limited industrialization, and underdeveloped financial markets.

De-dollarization requires trade rebalancing and industrialization, both of which are decades-long transformation processes. Before, and long after, this takes place, alternative payment channels and currencies will remain at the core of the African economy.