There was talk a year ago about a timid advance in digital financial services (DFS) in Benin and cautious optimism. In fact, 2017 was a good year for the sector, with new players joining the market and banks showing an interest in DFS. An annual survey of DFS providers conducted by the UN Capital Development Fund (UNCDF) MM4P programme offers detail about how the digital finance market evolved.

The Beninese digital finance sector grew significantly in 2017. Notably, the proportion of the population aged 15 and over with an active DFS account rose to 32 percent, up from 2 percent in 2014. And, of the approximately 7 million mobile money customer accounts registered, one third had at least one transaction completed in a three-month period.

Benin is home to 12 percent of customer accounts in the West African Economic and Monetary Union zone, with more than 200 agents available to serve 100,000 customers and over 500 merchants accepting mobile money payments, according to the Central Bank of Western African States.

Reaching this stage of market development required the commitment of all stakeholders, including regulators. Results of the UNCDF-MM4P survey revealed a dynamic DFS landscape, with a positive upward trend.

Mobile money is part of consumers’ habits

The population of Benin is increasingly using DFS. According to the survey, the customer activity rate almost quadrupled in three years: going from 15 percent in 2015 to 22 percent in 2016 and finally to 56 percent in 2017. People increasingly send remittances digitally, with transfers between individuals increasing by 768 percent nationally.

Slowly but surely, the Beninese are becoming aware of the value of DFS and are beginning to trust the services on offer. When UNCDF-MM4P team members discussed mobile money with customers, most mentioned speed, time savings and security as major benefits, as well as perks, such as phone credit, that are offered by DFS suppliers to encourage people to use the services.

Customer motivation is thus a very important aspect for providers to consider. Loyalty initiatives can increase the uptake of their services.

Quality of the agent network can boost activity

Agents are a powerful link in the DFS supply chain because they are in direct contact with customers. They are the first and sometimes the only intermediaries. As such, it is important that they are able to respond to various customer requests and, above all, that they have services available. DFS suppliers seem to have taken this issue on board and have scaled up their respective agent networks—the total number of agents in the market increased by 94 percent. The principle of free competition in the market has contributed significantly to this development.

Infrastructure is still to be developed

In terms of transactions, money withdrawals represent 30 percent of all transactions. Why do customers make withdrawals more than any other transactions? The question comes down to the limited offers in the market, which are still mainly oriented towards first-generation products (withdrawals/deposits, phone top-ups, bill payments, etc.)

Digital currency is still not so widely accepted as to allow people to access more goods and services and to pay with a digital wallet. However, with fintech companies entering the market and a wave of innovations bringing products such as digital credit, pay as you go or m-heath, 2019 will certainly have a richer offering for customers.

Prospects for the coming months

Given the market’s momentum in Benin, UNCDF-MM4P upped its target: by 2019, the programme intends to have 50 percent of the adult population actively using DFS. To achieve this objective, UNCDF will focus in particular on developing innovative services that enable vulnerable populations to earn more and improve their well-being. The programme will primarily aim its efforts at women, youth, entrepreneurs and rural areas.