Payments Online: Financial Institutions, Income Inequality and Mobile Money Innovations in Sub-Saharan Africa

This study examines the role of income inequality in the incidence of financial institutions depth on mobile money innovations in terms of the mobile phone used to send money and the mobile phone used to pay bills online. The focus of the study is on 42 countries in sub-Saharan Africa. Income inequality is proxied with the Gini index and the empirical evidence is based on: (i) quantile regressions in order to assess the nexuses throughout the conditional distribution mobile money innovations and (ii) Tobit regression in order to account for the limited range in the outcome variables. The following main findings are established. Financial institutions depth unconditionally promotes mobile money innovations while income inequality mitigates the positive incidence of financial institutions depth on mobile money innovations. The overall net effects are consistently positive and hence, the mitigating tendency brought about by income inequality is a necessary but not a sufficient condition to completely dampen the positive incidence of financial institutions depth on mobile money innovations. The findings are contingent on the proxy of mobile money innovation as well as initial levels of mobile money innovations. Policy implications are discussed.