From funding development projects to enabling trade, banks not only play a central role in fostering economic growth across the African region. Financial institutions (FIs) are also at the forefront of efforts to digitize African payments, Richard Southey, chief digital and experience officer at pan-African bank Absa CIB, tells PYMNTS.
When it comes to payments, Southey said a big part of the problem is the fragmentation across the region, whereby there are different payment infrastructures that range “from reasonably sophisticated to really not in place at all.”
It’s a challenge regional initiatives like the Pan-African Payment and Settlement System (PAPSS) are looking to solve, with real-time international payments providing opportunities to power pan-African commerce and create more efficiency and trust between trading partners, he said.
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Payments on the continent also face unique challenges at the consumer level, where digitization is taking a different shape to what has been seen elsewhere.
For example, although smartphone-enabled payments that rely on QR codes or near field communication have been transformative in the European payments landscape, Southey said that “the obsession around smartphones is actually not absolutely right, because USSD [unstructured supplementary service data] has actually become really powerful on the African continent.”
He acknowledged, however, that African payments will likely move more towards smartphones in the future, while pointing out that the significant change already brought about by mobile money plays a much larger role than other digital payment methods in driving the continent’s transition away from cash.
Bank-FinTech Symbiosis
Considering the importance of the mobile money ecosystem on the African continent, it is hardly surprising that banks have moved to embrace the technology.
For Absa, Southey said that although it might seem as if FinTechs and mobile money providers are direct competitors, the FI is actually helping to enable mobile money payments “by bringing the banking system a lot closer to the mobile payment networks.”
This, he added, is a way that banks can contribute toward the formalization of Africa’s informal economic activity.
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Banks can also partner with FinTechs on open banking strategies that enable them to provide innovative digital payment solutions to their customers, helping to accelerate the transformation of Africa’s informal sector.
“Open banking plays are important in that banks on their own are never going to be able to develop all the bespoke applications which are going to be important towards an informal trade. … FinTechs are starting to solve those problems,” Southey noted.
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As such, he pointed to the growing number of banks on the African continent that are getting involved and “putting out API marketplaces for FinTechs to climb on to” — an important part of how African economies are developing.
In the end, Southey said that bank-FinTech tie-ups are about “bringing capability to the market [so that] we can start to work off each other, where we may have presence and they have capability.”
He added: “Growing our economies is not a simple task. And we need to hold hands and do it together if we’re going to really build out the continent.”
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