As long as cash still dominates the payments landscape in Africa, it remains a stumbling block to much-needed technological progress and innovation, particularly for SMEs. According to Andrew Springate, CEO of tech and financial gateway service provider PAYM8, things are starting to shift as Africa’s digital payments race begins and true financial participation and inclusion becomes a reality.
The continent is on the cusp of some exciting developments. The Covid-19 pandemic has accelerated a greater acceptance of online digital payments, which has prompted financial institutions to ramp up their digital offerings to support growing consumer comfort and demand for cashless services.
Across sub-Saharan Africa, the World Bank reports an unbanked population of 350 million. This large cohort has historically been unable to fully participate in the convenience of e-commerce or access digital services. These challenges also extend to small business owners who face a host of frustrating payment issues, which include security concerns, exorbitant fees for certain point-of-sales (POS) systems, not to mention the risks inherent in dealing in cash. While bank interoperability remains something to be achieved, the technical complexity of some solutions for small and micro businesses are often not scaled enough to justify the cost.
As more mainstream banks embrace digital transformation to offer a greater variety of digital payment solutions, broader consumer adoption will follow, which will naturally lead to an increase in online sales and more customers attracted by enhanced convenience. Once this happens, marketplaces will grow exponentially and will expand to include the free flow of cross-border trade within the continent.
The African payments space has the distinct advantage of being able to leapfrog legacy systems with relative ease. Traditional payment methodologies are being bypassed as banks participate in solutions like rapid payments, where EFT payments are instantaneous, made by proxy and settled in mere seconds.
The inevitable uptake in digital payments, enhanced collection solutions, cross-border collaboration and new payment products will allow for much-needed economic growth in the short to medium term. Accelerating the digital transformation of financial services and solutions is vital to empowering small and micro businesses, as well as their customers, to conveniently make and receive secure payments.
Ultimately, electronic payments come with considerable macroeconomic benefits. African economies need innovative payment mechanisms that promote entrepreneurship while accelerating financial inclusion for those who need it most.