The Effect of Mobile Money Adoption on the African Banking Sector

Abstract

This paper offers the first causal analysis of the effect of mobile money adoption on African bank performance, analyzing whether mobile money existed as a complement or substitute to the services provided by commercial banks. A staggered-timing difference-in-differences model using country-level panel data from 2001 to 2024 estimates the causal impact of mobile money on twelve bank outcomes. The results indicate that mobile money deployment caused a significant decrease in retail deposits and loans. Robustness analysis reveals mobile money caused a decrease to total loans and a worsening of bank efficiency within countries with high mobile money adoption, while mobile money within low-adopting countries was found to increase total loans and improve bank efficiency. Profitability, stability, and customer service strategy were found to remain unchanged. This paper offers evidence for mobile money’s competitive pressure on the banking sector, supporting the goal of the FinTech movement of improved services through competitive innovation.