Mobile phones have become ubiquitous in Africa.
As a result, mobile technology plays an important role in the social and economic development in Africa (specifically in sub-saharan Africa) — providing mobile connectivity which in return fuels innovation that contributes to economic growth. According to GSMA — the organization that represents mobile operators worldwide, mobile money accounts are replacing traditional bank accounts in Sub-Saharan Africa, with more than 420 million mobile subscribers and approximately 300 million mobile money accounts.
Yet, while consumers have the ability to pay digitally in Africa, businesses still struggle to accept digital payments. Globally, merchant payments makes up less than 10% of digital payments . By volume, 66% of mobile money transactions are still used for airtime top-up. By value, 72% of transactions are person-to-person transfers. This severely limits the ways in which consumers can use their digital accounts.
In Africa, merchants and the financial institutions which serve them are crippled because the digital payment ecosystem is heavily fragmented. Yet digital payments represent a significant opportunity in the next couple of years. The World Payments Report 2017 indicates that global digital payments volumes are predicted to increase by an average of 10.9% through to 2020, reaching nearly 726 billion transactions.
Compared to the widespread card acceptance in developed markets, card penetration is less than 5%. The rest of the payments are made in a maze of more than 277 mobile wallets, more than 500 banks, and several card networks in 55 countries.
This maze and fragmentation of the payment ecosystem forces merchants to integrate with multiple payment service providers (PSPs) and banks to accept payments from their consumers, which is not only cumbersome, but can be expensive for small enterprises. Issues with settlement, withdrawn transfer fees all encourage both customers and businesses to default to cash.
We need to make it easier for customers and business to make and accept payments. How?
1. Invest in payment processing technology- we need to make it easier for merchants to digitally pay and get paid. This means providing a one-stop shop where merchants can integrated securely and access checkout options across Africa. Consumers can then pay for goods and services in their local currency using mobile wallets, credit and debit cards, and bank accounts.
2. Create an efficient payments infrastructure network across Africa- With digital payments volumes predicted to double in the next 2-3 years, we need an efficient, secure and reliable payments and settlements systems that works across Africa. In particular, if the predicted growth is to be realized, complicated and out of date payment infrastructure and processes need to be addressed to allow merchants and consumers to trade across borders in the manner they are used to. An integrated payments infrastructure will create corridors for trade and intercontinental cooperation while driving economic growth and foster economic development. This is the main reason Cellulant has spent the last 7 years building a network of payment players across Africa. As a result, we are now able to provide digital payment options for both the customers and the businesses- seamless across the continent.
3. Improve access and usage of cross-border payments- There is an increase in cross-border payments from multinational companies- an opportunity to open up the trade of goods internationally. However, while digital payments, and in particular cross-border payments represents one of the biggest business opportunities for businesses and the economies in Africa, many are being held back by cumbersome cross-border payment infrastructure which fails to acknowledge local market nuances. An efficient payments infrastructure network will enable the smooth flow of goods and services between countries and across regions.
In the next 2-5 years, African entrepreneurs have the opportunity to transform the way business and consumers interact around money. We already have a great start- mobile subscribers are at 420M, internet penetration is at 26% and with the growing adoption of mobile money wallets across the continent- digital payments should become the norm rather than the exception. A cash-less Africa is on the horizon.
By Ken Njoroge, Group CEO, Cellulant