In Africa’s ever-changing payments ecosystem, innovation is the norm.
In just two decades, major transformations have taken place across the continent — and virtually every few years, a new shift takes place. From the rise of telco-led mobile money, notably with PESA in Kenya in 2007, to the growth of automation across the industry, Osahon Akpata, head of consumer payments at Ecobank, has seen many payment advancements first-hand.
“In the 2010s, we started to see more automation in clearing houses across the continent,” Akpata told PYMNTS in an interview. “Nigeria launched the interbank settlement system in 2011, which began the period of faster settlement of transactions and a focus on interoperability.”
Recent years have also seen the launch of a joint agreement between MTN and Orange in 2018 called Mowali (mobile wallet interoperability) that aims to tackle interoperability across financial services providers.
Read Akpata’s interview: Interoperability is Key to a Humongous Change in Payments, Says Ecobank Consumer Payments Head
At the same time as blockchain technology spread across the globe, the use of cryptocurrencies is booming in emerging markets such as Nigeria, due in part to the challenges with foreign currency transactions.
A surge in venture capital investment in Africa is also enabling startups to build new solutions to capture payment opportunities as well as improve user experience and reduce friction, indicating that a lot more innovation can be expected this decade, Akpata said.
Tackling Financial Inclusion
Even though most payment transactions in Africa are completed with cash, Akpata said digitizing retail payments is a huge opportunity and many firms are actively pursuing this goal.
As more and more transactions become digital, billions of dollars in fees that are charged by correspondent banks will decrease, resulting in cost savings of hundreds of millions.
“We would just trade among ourselves directly without going through a third currency, and that would actually change the picture because today, that’s one of the biggest factors that people [have to] deal with,” Akpata said.
Furthermore, if payment providers are going to truly capture the opportunities on the continent, tackling financial inclusion will need to be a key focus on a continent where less than 40% of adults own a bank account, Akpata noted.
Agency banking is another way by which markets can expand financial inclusion and support people digitizing their cash, a strategy Ecobank has adopted.
“Ecobank has established over 100,000 agent locations across the continent so far, because we believe the key to expanding financial inclusion is providing points of service in the neighborhoods where our customers live and work,” he explained.
Overall, there may be no one-size-fits-all solution that will support Africa’s unbanked population, but Akpata said that a mix of improving infrastructure, providing financial literacy services and creating effective regulatory guidelines will go a long way to giving unbanked individuals the tools they need to make the digital shift.
Complex Regulatory Landscape
Given the multiple regulatory frameworks and standards existing from once country to another, over 40-plus currencies and multiple central banks across the continent, the complex regulatory landscape across the region can be a huge stumbling block when it comes to enabling payments transformation.
But according to Akpata, banks have close working relationships and often long histories with regulators which makes collaboration between the two parties much easier.
The challenge, however, is with FinTech firms that “are new on the block,” Akpata noted. He added that even though these newer firms tend to get licenses for some of their operations, the amount of engagement they have with regulators and banks is still relatively limited.
“So, as banks develop more partnering capabilities and advise FinTechs on how to stay within regulation, and then as regulators interact more with FinTech firms and understand the value that they’re bringing to the table, I think that we’ll see things shifting,” he continued.
Ubiquity of Payment Acceptance
On emerging trends in the payment landscape, Akpata said Africa has strong fundamental characteristics that will ensure that the future of payments across the continent is bright.
Africa has a young median age, a highly digital native population and widespread smartphone penetration across the region, offering both banks and FinTechs customers who are interested in innovative and cutting-edge payments solutions.
Interoperability between mobile money operators is also improving and will ensure the smooth movement of value between payment provider networks at minimal costs, while opening new possibilities for all players involved.
Learn more: Instant Payments Set to Boost Intra-African Trade by $5B Annually
The recently launched Pan-African Payment Settlement System (PAPSS), which has been designed to enable instant payments across African borders, will further drive this trend towards payment system interoperability, he noted.
It won’t be long before payment acceptance will be ubiquitous, he added, just like PayPal democratized payment acceptance in 1999, with mobile devices and the internet playing a key role in the proliferation of payment acceptance points across the region.
“We’ve seen the effect that some of the new FinTechs have had on online payments, which used to be an expensive and cumbersome process for small businesses. These solutions will scale up as eCommerce continues to grow on the continent,” Akpata said.
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