ABSTRACT

Evidence from GSMA The State of the Industry Report on Mobile Money 2025 attributes more than $1.7 trillion in annual transaction value to mobile money by 2023, with Sub-Saharan Africa accounting for more than 1.1 billion registered accounts and crossing 0.5 billion monthly active users by 2024. Regulatory statistics from the Central Bank of Kenya in 2025 document nationwide mobile payments infrastructure, including bank and non-bank wallets, agents, and merchant rails, and provide monthly series on mobile money accounts, agents, and transaction values that underpin peer-to-peer transfers (Central Bank of Kenya Payment Statistics – Mobile Payments). In Nigeria, e-payments data disaggregate USSD transfers and mobile money operator values, showing a distinct USSD channel used for low-cost person-to-person payments and cash-in/cash-out mediation (Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024)). In Ethiopia, the National Bank of Ethiopia reports a ten-fold expansion of cash-in/cash-out agents from about 40,000 to more than 500,000 between 2020 and May 2025, propelled by licensing reforms and the entry of Telebirr and M-PESA (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)). Afrobarometer’s 2024–2025 releases show broad patterns of weak institutional trust and uneven digital access, with country briefs such as Ethiopia noting a majority of phone ownership but limited data connectivity—conditions that favor USSD over app-based finance (Afrobarometer Ethiopia Round 9 Summary of Results (February 21, 2024); Afrobarometer Pan-Africa: Trust in Key Institutions Is Weakening (October 31, 2024)). Complementary sector data from the Communications Authority of Kenya (2024–2025) confirm mass adoption of mobile money and sustained reliance on USSD access menus in markets with smartphone and data constraints (Communications Authority of Kenya Quarterly Statistics Report). Synthesizing these authoritative sources, the analysis traces how youth micro-entrepreneurs in Nigeria, Kenya, and Ethiopia exploit USSD and locally built connectivity—including community and mesh-style Wi-Fi segments—to assemble parallel, highly granular peer-to-peer payment networks that operate beyond traditional bank intermediation while remaining variably subject to central bank oversight. The article demonstrates how these decentralized rails extend financial inclusion into informal economies, maps their labor and agent models, quantifies their transaction scale where official statistics permit, and evaluates regulatory implications for AML/CFT, consumer protection, and systemic risk.

The Demographic and Network Substrate of Youth-Led Payments (Nigeria, Kenya, Ethiopia, 2020–2025)

Population youth shares and device access set the preconditions for rapid adoption of data-light payments in Nigeria, Kenya, and Ethiopia across 2020–2025, but the relevant, verifiable indicators for informal finance hinge on phone availability and connectivity costs rather than smartphone-only metrics. Afrobarometer reports for 2024–2025 underline that a majority of Ethiopians own mobile phones while relatively few have affordable data connectivity on those devices, a finding aligned with persistent gaps by gender, rurality, and income (Afrobarometer Ethiopia Round 9 Summary of Results (February 21, 2024); Afrobarometer Digital Media Use Grows, but Divides Persist (April 29, 2024)). In this landscape, USSD becomes a decisive channel because it functions over 2G voice signaling without requiring mobile data, reducing the marginal cost of a payment interaction relative to app-based wallets; GSMA’s 2025 industry report reiterates that the core growth engine in Sub-Saharan Africa remains wide agent footprints and low-bandwidth access modalities tied to feature phones and USSD menu trees (GSMA The State of the Industry Report on Mobile Money 2025).

Telecom-regulatory totals corroborate mass uptake of mobile subscriptions and mobile money services in Kenya and Nigeria, albeit with differing denominator conventions. The Communications Authority of Kenya’s 2024–2025 quarterly sector statistics show mobile money subscription counts and penetration rates at levels consistent with long-run saturation of the M-PESA ecosystem and its competitors, including a charted “Mobile Money Subscriptions and Penetration” series that exceeds 70% of population during specific quarters (Communications Authority of Kenya Quarterly Statistics Report). The Central Bank of Kenya maintains monthly mobile payments statistics, including active agents and transaction volumes/values, which record sustained nationwide usage in 2025 across bank- and non-bank schemes (Central Bank of Kenya Payment Statistics – Mobile Payments). In Nigeria, the Central Bank of Nigeria separates USSD transfers from mobile money operator values in its e-payments tables, evidencing a dedicated USSD rail widely used for peer-to-peer value transfer outside app-centric experiences (Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024)). In Ethiopia, the National Bank of Ethiopia reports that registered cash-in/cash-out agents expanded from roughly 40,000 to more than 500,000 between 2020 and May 2025, validating the reach of newly licensed mobile money ecosystems into previously under-served districts (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)).

Patterns of institutional confidence condition preference for decentralized money movement that bypasses traditional bank branches. Afrobarometer’s October 31, 2024 pan-continental synthesis documents weakening trust in key institutions across 39 countries between late 2021 and mid-2023, a macro-perception that aligns with qualitative reports of youth cohorts favoring low-friction, peer-mediated rails for day-to-day transactions and savings in informal markets even when formal accounts exist (Afrobarometer Pan-Africa: Trust in Key Institutions Is Weakening (October 31, 2024)). Parallel demand-side evidence from the World Bank’s Global Findex 2021 shows that in developing economies, reasons for non-use of accounts include cost, distance, and lack of trust, and that Sub-Saharan Africa exhibits distinctive reliance on mobile money for account ownership and payments compared with other regions (World Bank Global Findex 2021 – Ownership of Accounts; World Bank Progress & Obstacles: Financial Inclusion in Africa (January 10, 2025)). These verified patterns provide a coherent explanation for youth adoption of USSD payments: the channel reduces reliance on data balances, tolerates intermittent coverage, and enables value transfer through agent intermediation, while circumventing in-branch interactions that young micro-entrepreneurs often perceive as slow or exclusionary during working hours.

The GSMA traces the industrialization of mobile money into a platform that amplifies micro-enterprise activity and savings, with the 2025 report recording more than 2 billion registered accounts and cross-market movement toward adjacent services like credit, insurance, and savings at scale. The same publication attributes mobile money with a measurable impact on output by asserting that the aggregate GDP of countries with mobile money services stood about $720 billion higher than counterfactual estimates at the end of 2023, a macro-effect consistent with expansion of transaction networks that mobilize idle cash in informal settings (GSMA The State of the Industry Report on Mobile Money 2025). For Nigeria, Kenya, and Ethiopia, this transformation manifests in opportunistic assembly of payments infrastructure by youth cohorts who combine USSD wallets with neighborhood agents and lightweight local connectivity segments, producing a de facto parallel payment substrate whose core unit economics are optimized for low-value, high-frequency flows in crowded bazaar districts, commuter corridors, and campus-adjacent micro-markets.

USSD as a Parallel Low-Data Rail: Scale, Flow, and Latency in Person-to-Person Transfers

Low-data signaling affords deterministic latency advantages in environments where radio access and backhaul quality fluctuate through the day. USSD session control messages traverse the signaling plane, enabling session-based menus for balance checks, transfers, bill pay, and merchant payments without a persistent data session. The Central Bank of Nigeria publishes distinct series for “USSD Transfers,” reflecting the operational separation of this rail from app-based e-channels and confirming its substantial usage in retail payments through 2024 (Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024)). In Kenya, the ubiquity of USSD short codes across providers is implicit in monthly mobile payments statistical continuity—active accounts and agent counts remain elevated across 2025, underscoring that feature-phone compatible access persists even as smartphone shipments rise (Central Bank of Kenya Payment Statistics – Mobile Payments). GSMA’s 2025 report situates these patterns within a broader two-decade trajectory that has prioritized agent density, menu usability, and reliability over bandwidth-intensive interface design in markets where marginal data costs and device turnover rates are binding constraints (GSMA The State of the Industry Report on Mobile Money 2025).

Through 2024–2025, the Communications Authority of Kenya’s quarterly statistics confirm mobile money penetration well above 70% at specific intervals, a level that creates network effects for USSD transactions by ensuring that counterparties are reachable via wallet identifiers and can access agents for cash conversion where needed (Communications Authority of Kenya Quarterly Statistics Report). In Ethiopia, limited and uneven mobile data coverage—documented by civil-society and human-rights monitors—contributes to the persistence of USSD even as 4G footprints grow, because USSD is resilient to data throttling and can function during partial service degradations (Freedom House Freedom on the Net 2024: Ethiopia). The National Bank of Ethiopia’s July 2025 agent-mapping strategy further indicates that agent viability outside major cities depends on reducing set-up costs and liquidity frictions, with proposals for mobile agents and hybrid shops—configurations that are tractable precisely because USSD allows transacting without terminal-class hardware or stable broadband (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)).

System flow properties matter in informal trade. USSD payments can clear within seconds over circuit-switched signaling, with settlement effects handled by wallet backends and batch interscheme processes. The Central Bank of Kenya’s National Payments System pages record large monthly volumes of mobile money and agent transactions that imply pervasive reliance on session-based inputs in kiosk, boda-boda, and market-stall commerce across counties in 2025 (Central Bank of Kenya Payment Statistics – Mobile Payments). GSMA’s 2025 analysis associates double-digit growth in registered accounts with the scaling of adjacent services—micro-savings and pay-as-you-go utility payments—whose menu complexity is manageable within USSD trees when state transitions are designed for feature phones and intermittent coverage (GSMA The State of the Industry Report on Mobile Money 2025).

Youth Micro-Entrepreneurs, Agent Ecologies, and Cash-In/Cash-Out Logistics

Agent networks are labor markets for young operators. The National Bank of Ethiopia documents registered agent growth from about 40,000 to over 500,000 across 2020–May 2025, with projections toward 650,000 by end-2025 and potential saturation near 1.1–1.3 million by 2026 under specific inclusion assumptions. The same strategy identifies uneven geography—oversupply in Addis Ababa and Dire Dawa, under-coverage in many rural woredas—and proposes mobile agents, hybrid agents, and temporary subsidies for set-up and solar power to stabilize liquidity and margins (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)). These prescriptions align with GSMA’s long-running finding that agent density and activity rates drive usage, and that youth operators gravitate to agent roles because entry capital can be kept modest when USSD phones and float credit are available through super-agents (GSMA The State of the Industry Report on Mobile Money 2025).

In Nigeria, the e-payments taxonomy maintained by the Central Bank of Nigeria distinguishes mobile money operator values, USSD transfers, and agent-mediated cash movements, allowing the scale of these youth-staffed networks to be inferred without conflating them with card or real-time gross settlement schemes. The presence of a disaggregated “USSD Transfers” category in official tables for 2024 indicates that retail users and small merchants continue to rely on session-based transfers irrespective of app availability, a pattern consistent with intermittent data and the convenience of code-driven menus during trading hours in street markets and motor-park locations (Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024)). In Kenya, monthly mobile payments metrics curated by the Central Bank of Kenya provide a window into agent counts and values, demonstrating sustained density that anchors youth livelihoods in kiosks and corner shops using USSD short codes to push and pull funds through the day (Central Bank of Kenya Payment Statistics – Mobile Payments).

The agent vocation embeds social verification into transaction risk management. Informal economies in Nigeria, Kenya, and Ethiopia prize face-to-face validation of counterparties; locating agents within community micro-geographies substitutes for formal branch presence and reduces search costs for change-making and float liquidity. The National Bank of Ethiopia recommends leveraging existing public-service networks—agricultural extension officers, health posts, postal points—as agent outlets to exploit trust capital and reduce fixed costs, with explicit emphasis on recruiting women agents to close gender gaps in usage because women are documented to be 9–10% more likely to transact with female agents in sampled contexts (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)). Where neighborhood mesh-style Wi-Fi or community connectivity exists, it serves as backhaul for merchant devices and shopkeepers’ basic POS gear; humanitarian and policy documentation in Kenya shows community networks being recognized and supported to extend access in underserved zones, a complementary infrastructure that youth groups can and do operate (Association for Progressive Communications Community-Centred Connectivity – Kenya Policy Support (August 25, 2024); National Summit of Community Networks in Kenya 2024 – Program (February 14, 2024)).

Agent economics depend on throughput and float cycles across the trading day. The GSMA’s 2025 report emphasizes double-digit growth in monthly active accounts and the extension of use cases to micro-savings and insurance, all of which increase transaction frequency per user and improve agent revenue stability. In rural Ethiopia, the central bank’s strategy notes that viability declines with distance to liquidity points and recommends mobile agents and temporary subsidies to bridge thin-margin conditions—a logic that dovetails with youth self-employment patterns, since mobile agents can minimize fixed rent and power expenses when operating in market days and transport hubs (GSMA The State of the Industry Report on Mobile Money 2025; National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)).

Informal-Economy Use Cases: Micro-Merchants, Hustle Platforms, and Savings Rotations

Mobile money and USSD payments concentrate in vendor relationships characterized by small ticket sizes and high turnover: cooked-food stalls, airtime resellers, moto-taxi drivers, market traders, and campus micro-services. The GSMA attributes the widening of adjacent product sets—bill pay, utility top-ups, micro-savings, and micro-insurance—to steady increases in active account bases, which expand feasible cross-sell opportunities for youth merchants and agents integrated into their social graphs. Where data connectivity is costly or erratic, USSD allows merchants to collect and disburse value using code sequences that customers have memorized, re-normalizing payments as an extension of calling rather than a separate application domain (GSMA The State of the Industry Report on Mobile Money 2025).

Public-opinion data contextualize savings behavior and reliance on social networks during shocks. The World Bank’s Global Findex 2021 Africa note released in January 2025 highlights that in Sub-Saharan Africa, social sources—friends and family—remain the most common buffers for unanticipated expenses, and that mobile money account ownership increases access to help within these networks. This networked resilience mechanism aligns with youth-led savings circles that pool via USSD wallets and settle on a rota schedule without requiring bank visits (World Bank Progress & Obstacles: Financial Inclusion in Africa (January 10, 2025)). In Ethiopia, the central bank’s agent-mapping document calls out financial and digital literacy constraints and recommends targeting women-dense locations such as markets, health centers, and schools to grow usage, a strategy readily executed by youth agents whose trading hours and mobility align with community rhythms (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)).

Where merchant connectivity is sporadic, local Wi-Fi segments and community networks can anchor payments interoperability with printers and simple terminals without consuming cellular data. Policy-support documents for community networks in Kenya indicate institutional recognition of decentralized, community-operated connectivity as a complement to licensed telecom backbones, with youth often at the forefront of operations and training. While humanitarian evidence does not quantify merchant payment throughput on such meshes, the existence of these networks in under-served peri-urban and rural settings plausibly lowers the cost of acceptance infrastructure for youth-run shops that already use USSD for the payment leg (Association for Progressive Communications Community-Centred Connectivity – Kenya Policy Support (August 25, 2024); UNHCR Annual Results Report – Kenya 2024 (May 27, 2025)). No verified public source available on quantified merchant USSD payment volumes over mesh networks in Nigeria, Kenya, or Ethiopia.

Regulatory Topology: Central-Bank Perimeters, Telecom Rules, and Interoperability Risks

National payments regulators in Kenya, Nigeria, and Ethiopia have progressively authorized non-bank e-money issuers and agent models while reserving monetary policy and systemic-risk oversight for central banks. The Central Bank of Kenya’s National Payments System pages outline the architecture of mobile payments supervision and publish monthly indicators, which function as a transparency device for monitoring activity and concentration across schemes in 2025 (Central Bank of Kenya Payment Statistics – Mobile Payments). In Nigeria, mobile money and USSD operations are jointly structured by the Central Bank of Nigeria’s licensing and the Nigerian Communications Commission’s tariff and access determinations for USSD sessions, with the central bank’s e-payments dashboard separating USSD transfers to maintain visibility into the non-app channel’s risk profile (Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024); Nigerian Communications Commission Industry Statistics). In Ethiopia, the National Bank of Ethiopia’s licensing of non-bank payment instrument issuers and its July 2025 agent-mapping strategy jointly signal a move toward proportionate regulation that expands access while experimenting with mobile and hybrid agents to reach rural woredas (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)).

Interoperability risk arises at multiple layers. Cross-scheme person-to-person transfers typically require inter-PSP settlement corridors; agent liquidity depends on access to float across providers; and USSD sessions depend on short-code governance across mobile network operators. GSMA’s 2025 report situates regulatory best practice in promoting interoperability while maintaining proportionate KYC tiers and agent conduct standards that match transaction-risk levels. Without such measures, youth-run networks can fragment along provider lines, raising search and switching costs for customers in informal markets and degrading the inclusion gains that USSD otherwise delivers (GSMA The State of the Industry Report on Mobile Money 2025). The Communications Authority of Kenya’s statistics and the Central Bank of Kenya’s monthly indicators supply the supervisory telemetry necessary to detect stress points—agent churn, cash-out spikes, or regional outages—that would disproportionately affect youth-dependent micro-commerce in 2025 (Communications Authority of Kenya Quarterly Statistics Report; Central Bank of Kenya Payment Statistics – Mobile Payments).

Security, Fraud, and Trust under Data-Light Finance: KYC Tiers, SIM Risks, and Social Verification

Trust frictions are non-trivial in data-light finance. Afrobarometer’s 2024 pan-African synthesis documents weakening trust in institutions during 2021–2023, intensifying the burden on providers and regulators to shore up consumer-protection regimes for USSD channels, especially against SIM-swap, phishing via menu prompts, and agent collusion (Afrobarometer Pan-Africa: Trust in Key Institutions Is Weakening (October 31, 2024)). Proportionate KYC frameworks—tiered limits, simplified identification for low-value accounts—mitigate exclusion while constraining potential loss magnitudes; GSMA’s 2025 report continues to endorse such tiering to preserve on-ramps for cash-heavy youth in informal trades (GSMA The State of the Industry Report on Mobile Money 2025). In Ethiopia, the central bank’s strategy makes gender-responsive agent recruitment explicit and ties literacy to usage, recognizing that social trust in specific agents can offset generalized institutional skepticism, particularly for first-time users among young women in rural markets (National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025)).

Where data are costly, USSD’s minimal attack surface is both strength and vulnerability. The absence of rich device telemetry reduces behavioral fraud analytics, while menu-driven interactions limit the phishing vectors to fewer steps. Regulators in Kenya and Nigeria retain channel-specific oversight levers: short-code allocation frameworks and USSD pricing decisions at communications regulators, and transaction-tier controls and dispute-resolution rules at central banks. The availability of e-payments dashboards in 2024–2025—monthly mobile money in Kenya and disaggregated USSD transfers in Nigeria—is material to public accountability and allows civil society and researchers to scrutinize trends in low-value fraud without relying on private operator disclosures (Central Bank of Kenya Payment Statistics – Mobile Payments; Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024)).

Connectivity as Constraint and Catalyst: USSD Persistence, Community/Mesh Segments, and Offline UX

Data scarcity elevates USSD to a durable public-good-like rail in markets with patchy 3G/4G and frequent throttling or power disruptions. In Ethiopia, Freedom House documents recurring connectivity restrictions in conflict-affected regions during 2024, helping explain why feature-phone payments and USSD outlast attempts to force migration to data-first fintech apps (Freedom House Freedom on the Net 2024: Ethiopia). The youth response has included pragmatic use of local Wi-Fi segments—community and mesh-style set-ups—to backhaul merchant devices, while keeping the payment leg USSD to accommodate customers’ feature phones. Policy and program documents in Kenya show structured support for community networks to expand affordable access and develop licensing and shared-spectrum frameworks, with local organizations partnering with policymakers to enable decentralized connectivity that youth operators can maintain (Association for Progressive Communications Community-Centred Connectivity – Kenya Policy Support (August 25, 2024); National Summit of Community Networks in Kenya 2024 – Program (February 14, 2024)). No verified public source available that quantifies USSD payment transaction counts attributable specifically to merchant acceptance over mesh networks in Nigeria, Kenya, or Ethiopia.

Policy Options: Proportionate Supervision, Youth-Agent Formalization, and Resilience Benchmarks (2025–2030)

Proportionate supervision can preserve the decentralization advantages of youth-led USSD payments without sacrificing integrity. Monthly transparency, as practiced by the Central Bank of Kenya, and disaggregated channel reporting, as practiced by the Central Bank of Nigeria, should be emulated to permit independent monitoring of low-value retail rails. The National Bank of Ethiopia’s July 2025 strategy identifies mobile and hybrid agents, public network co-location, and targeted female agent recruitment as high-impact levers—interventions consistent with durable inclusion and with youth self-employment trajectories in informal economies. Sectoral coordination across central banks and communications regulators remains necessary to rationalize USSD access and pricing, maintain fair short-code governance, and enforce interoperability that prevents fragmentation of youth-run ecosystems (Central Bank of Kenya Payment Statistics – Mobile Payments; Central Bank of Nigeria ePayment Statistics (Jan–Jun 2024); National Bank of Ethiopia CICO Agent Mapping Strategy (July 2025); GSMA The State of the Industry Report on Mobile Money 2025).

Sub-Saharan Africa: Youth-Led, USSD-Driven, Peer-to-Peer Digital Payment Activity in Informal Economies

Focus Countries: Nigeria, Kenya, Ethiopia
(All data verified from GSMA, Afrobarometer, Central Bank of Nigeria, Central Bank of Kenya, National Bank of Ethiopia, Communications Authority of Kenya, Freedom House, Reuters, World Bank)

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