One Africa: Towards a future of integrated digital payments



The free flow of goods and services is a foundation of economic prosperity. The easier and faster the corridors of trade can flow between people, entrepreneurs, SMEs, communities, and nations – the more likely it is for people and their families to escape poverty and for businesses to flourish. As digital payments proliferate, there’s a massive opportunity and economic incentive for the continent to implement a fully integrated digital payments landscape.


In today’s globalised economy, the seamlessness of digital payment systems, like P2P payments, cross-border remittances, mobile money wallets and the like, are crucial for financial inclusion and growth. In 2021, Africa accounted for 70 percent of the total value of mobile money transactions globally. Despite a sharp rise in digital payment solutions, Africa’s payments ecosystems remain highly fragmented which has a negative effect on trade, businesses, and consumers.


The good news: Major strides are being made in the right direction to secure a future in which payment systems are fast, efficient, seamless and fully interoperable.


One system to rule them all

When interoperability between systems and digital payments solutions is low there are more barriers to the ways in which governments, banks, telcos, SMEs and consumers can pay and get paid. Having interoperable payment systems among African countries is a vital step toward increasing trade on the continent, reducing reliance on expensive imports, and keeping vital spend within African economies. The Africa Free Continental Trade Area (AfCFTA) and its plans for an interconnected Pan-African Payment and Settlement System (PAPPS) has the potential to become the overarching regulatory framework that will tie all disparate payment solutions together.


One area of ongoing concern is the efficiency of cross-border payments. With a large African diaspora spanning the globe, the movement of funds into the continent is a lifeline for millions of people. Remittance inflows into sub-Saharan Africa alone amount to around USD$47 billion yet payment corridors between Africa and the rest of the globe are the most expensive in the world. According to one report from the African Development Bank, over 80 percent of African cross-border payment transactions are routed offshore for clearing and settlement using third-party banks usually located outside the continent.



Why it matters?

According to Mastercard, 40 percent of consumers surveyed said their family members living internationally would not have survived without the funds. In addition, 70 percent of SMEs surveyed by Mastercard said the global payment network helped them endure the pandemic and nearly 60 percent of SMEs reported increasing their use of cross-border payments during the pandemic.


Another key challenge is the many different payment types across African countries; varying from traditional banking services to mobile money wallets and cards – all of which adds to the difficulty of handling online transactions in different local currencies and processing digital payments.


The cost of payment fragmentation

The effects of payment fragmentation aren’t just frustrating for businesses, they’re also expensive. Attempting to maintain connectivity with multiple service providers simply isn’t feasible for merchants who don’t have the technical expertise and assistance to manage such an undertaking. Payment reconciliations then add yet another layer of complexity to the picture thanks to varying periods of credit among different operators making it hard for merchants to manage their own payments and cash flow.


The future is FINTECH

Much more can be done to enhance the interoperability of systems and solutions so that African businesses can sidestep uncertain transaction delays caused by limited correspondent bank relations, foreign currency availability, and limited cross-border payment rail capacity.


Aside from governments advocating for the Pan-African Payment and Settlement System (PAPPS) to become more inclusive so that its benefits can extend to small-scale traders, building partnerships and integrating with fintechs is essential for all players in the African payments ecosystem. Fintechs are dominating a significant share of the continent’s payment space and are proving to be a game-changer to financial inclusion, and cross-border trade all while spearheading new and innovative embedded finance solutions. Ultimately, participation in a single, seamless digital market will connect 1.3 billion people and unlock trillions in consumer spending.