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Modernisation in the African payments landscape

In just a few short months Africa has seen momentous change in its payment infrastructure, with initiatives from both private and public institutions. Many people will point to the global pandemic as a key factor in this wholesale change. However, COVID-19 is simply a catalyst; it is accelerating digital trends that have been emerging in the African region for over a decade.

Recent evolutions of payments in Africa

Africa has long been seen as a global leader in mobile money, its huge penetration of mobile phones in contrast to formal bank accounts made it a natural breeding ground for innovative payment solutions. Much of this innovation has come from the private sector, but the recent pandemic has meant the initiative has fallen to Governments and the public sector.

In many African nations the economy is heavily reliant on informal work, with salaries collected weekly or bi-weekly in cash. With many people unable to work, governments, by necessity, have adopted direct digital payments to support their citizens and their economy.

A recent digital payments virtual panel from the World Economic Forum highlighted how African nations have supported their economy by fast adoption of direct digital payments to citizens. Furthermore, the World Health Organisation have encouraged the usage of contactless mobile payments to curb the spread of COVID-19.

These combined trends have meant that Africa is now facing an extreme upheaval in digital payments and banking. A 2018 McKinsey report highlighted the potential in African banking which we are now seeing come to fruition.

Governments have implemented wholesale regulatory change, most notably in e-KYC as they move to provide citizens with necessary monetary needs. Previously, the KYC process was bureaucratic, and all done in person. With the shift to e-KYC, mobile payments and banking has become more efficient, transparent and open to adoption.

What did the Covid crisis revealed about online payment?

The current crisis has pushed regulators to modernise the payments infrastructure which, in turn, will mean that digital payments and banking will thrive in the near future in Africa.

Not only will citizens be able to receive stimulus money in a difficult time, but it means they are now enabled to spend their money electronically. The change over the past few months has opened up millions of people to digital payments.

The private sector has always been innovative in Africa, and this time is no different. HPS partnership with Ghana Interbank Payment and Settlement Systems (GhIPSS), a subsidiary of the Bank of Ghana to launch universal QR Code and Proxy Pay platforms, shows that increasingly contactless payment methods are constantly evolving and growing in Africa. In this case, Ghana is the first nation in Africa to unveil this technology as part of an initiative to stop the spread of the virus.

A recent survey conducted by Mastercard shows that 70% of consumers in the Middle East and Africa use contactless payments, citing health and safety concerns as a core reason for adoption. This is remarkable and a true testament to the growing modernisation in every aspect of the payments sphere in Africa.

In Africa, the past few months are just a short chapter in a long history for payments technology. The region has always been an early adopter in innovative payments solutions, but this recent wave of modernisation, due in large part to the global pandemic, will ensure a dramatic change in the payments and banking ecosystem of Africa.