Imagining the Future of Payment Systems in Africa

Realizing financial inclusion has always been a formidable goal, but it is increasingly becoming attainable.

This challenge is being tackled through a variety of innovations from both traditional banking institutions and non-banking players, including fintech firms.

The momentum behind digital financial inclusion is grounded in strong economic principles—lowering transaction costs can substantially enhance economic growth, as emphasized in a World Bank report.

Africa has frequently been a pioneer in payment technology innovations, with the introduction of Mpesa in 2007 by Vodafone and Safaricom in Kenya, allowing users to send and receive money seamlessly. Mpesa now serves over 60 million users, processing more than $1 billion (over R18 billion) daily.

“The payments industry in Africa is undergoing remarkable expansion,” declares a report from Swift (Society for Worldwide Interbank Financial Telecommunications).

“Electronic and instantaneous payment systems are reshaping everyday transactions on a continent where cash remains prevalent, spurred by a youthful population that is accelerating digitization.

“Currently, Africa commands 70% of the global mobile money market, valued at $1 trillion,” asserts Swift.

Rufaida Hamilton, head of payments at Standard Bank in South Africa, highlights a critical turning point for Africa: the understanding that merely providing access to bank accounts is insufficient for achieving financial inclusion.

“In South Africa, the market for bank accounts has largely been saturated, yet the demand for quick, simple money transfers is still unmet by traditional payment systems.

“The next phase toward financial inclusion lies in enhancing payment accessibility.

“I do not foresee a complete phase-out of cash in the near future,” she adds. “However, we believe that reducing reliance on cash yields significant benefits.”

“The future of payments will involve a range of competitive and interconnected payment options.”

South Africa’s financial services sector is more advanced than many others in Africa, primarily due to the widespread use of card payments.

This progress has been further enhanced by card payment initiatives supported by the government for 28 million social welfare recipients, ensuring significant card penetration even among lower-income populations.

Innovation in digitized payments and mobile money in Africa is emerging from various sources, including banks, fintechs, retailers, and mobile network operators, with the key goal of effective collaboration among these entities.

At present, there are 28 instant payment systems operating across Africa, covering nearly as many countries (some nations have multiple systems), and while the technological capacity for interaction is nearly achievable, regulatory frameworks still need enhancement.

“The present challenge is for regulators to create an ecosystem that enables seamless transactions among these technology platforms and all participants,” notes Hamilton.

“In South Africa, regulators are preparing to implement a framework that anticipates an influx of non-bank players entering these systems. This signifies a major evolution. While banks have thrived in traditional banking services, the entry of fintech and non-bank firms into the market now provides payment services to those in need. Regulators must stay ahead of this shift.”

In 2025, South Africa will lead the G20 working group on Accessible Instant Cross-Border Payments, aiming to accelerate cross-border transactions, enhance accessibility, reduce friction introduced by regulatory bodies, standardize data storage protocols, and harmonize different standards for market supervision.

The question of which technology will dominate this evolving environment remains unresolved; however, Hamilton anticipates that electronic instant payments will surpass alternatives like cards and cash.

Although card payments offer benefits—such as loyalty rewards—many Africans cannot access these options. Physical cash poses inherent risks of loss or theft, along with hidden costs incurred from the need to visit bank branches or ATMs for transactions.

With smartphone usage in South Africa exceeding 50%, the era of widespread and immediate electronic payments is tantalizingly close. An increase in usage is expected to correspond with stimulating economic growth.

The capabilities offered by digital mobile devices promise a seamless, swift, and comprehensive uplift for the nation.

While the circulation of cash brings risks and expenses, a World Bank report suggests that digital currency can foster greater economic growth.

Another vital area of focus concerning instant payments is cross-border transactions. Approximately 80% of cross-border payments within Africa are processed through the Swift-enabled correspondent banking model. Hamilton emphasizes that Africa needs to establish connectivity networks similar to Project Nexus in Asia, initiated by the Bank for International Settlements, to facilitate connections and instantaneous interactions across various payment systems on the continent.

“We have progressed beyond merely adopting instant payment technologies; the next step is to remove regulatory obstacles to reduce friction between countries,” asserts Hamilton.

“A crucial advancement toward financial inclusion is ensuring that every African citizen receives a digital ID. This will allow regulators to recognize reliable digital identification, leading to lower transaction costs through bilateral agreements with South Africa. While 78% of the population possesses some form of formal identification in Africa, the emphasis must shift to digitization and fostering mutual trust in this identification.”

This message is provided by the Standard Bank Group.

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