Wenslus Murape
Financial inclusion is an elusive goal that is now closer to realisation than ever.
It’s being tackled through a variety of innovations from traditional banking and non-banking sources such as fintechs.
The push for digital financial inclusion is grounded in sound economics – it lowers the costs of transactions, which in turn leads to higher economic growth, according to a World Bank report.
Africa has frequently led innovation in payments technology, as it did with Mpesa – launched in 2007 by mobile network operators Vodafone and Safaricom in Kenya to enable users to send and receive money.
Today, Mpesa has more than 60 million users and transacts in excess of US$1 billion (more than R18 billion) daily.
“Africa’s payments industry is booming,” says a report by Swift (Society for Worldwide Interbank Financial Telecommunications).
“Electronic and instant payments systems are redefining day-to-day transactions in a continent where cash remains king, and where a youthful population is driving digitisation at a rapid rate.
“In fact, Africa currently accounts for 70 percent of the world’s US$1 trillion mobile money value,” says Swift.
Rufaida Hamilton, head of payments in South Africa at Standard Bank, says the biggest turning point for Africa “was when it was understood that just providing a bank account was insufficient to meet financial inclusion targets”.
“In South Africa, the addressable market for bank accounts has largely been satisfied, but the ability to move money instantly and easily has not been met in traditional payment services.
“The next step towards the goal of financial inclusion is ubiquity in payment.
“I don’t foresee cash disappearing any time soon,” she adds. But we do believe there are benefits to actively reducing the reliance on cash.
“The future of payments involves the co-existence of a multitude of payment options competing with each other and interacting with each other.”
SA’s financial services market is further advanced than most in Africa due largely to the widespread use of cards as a method of payment.
This has been assisted by card-based payments by the government to 28 million social welfare recipients, allowing for a deep penetration of cards even at the very poorest parts of the community.
Innovation in digitised payments and mobile money across Africa is coming from various sources: banks, fintechs, retailers and mobile network operators being the most prominent. The key is to get them to talk to each other.
There are 28 instant payment systems in Africa, across almost as many countries (some countries have multiple instant payment systems), and while the technological capacity to communicate between them is within reach, the regulatory framework still has some way to go.
“The challenge now is for regulators to create an ecosystem that allows smooth transactions across these tech platforms by all the players in the space,” says Hamilton.
“In SA, our regulator plans to adopt a framework which anticipates more non-bank players moving into these systems. That’s a big shift. Banks have done well with traditional banking services, but now we have fintech and non-bank players coming into the market and delivering payment services to markets where it is needed. The regulators need to get ahead of this trend.”
The G20 working group on Accessible Instant Cross-Border Payments will be chaired by SA in 2025 when the focus will be on the pace of cross-border payments, the ease of accessibility, reducing friction introduced in cross-border payments between regulators, harmonising standards for the storage of data, and addressing differing standards for the supervision of market participants.
Which technology emerges victorious from this race is an open question, though Hamilton expects electronic instant payments – as opposed to alternatives such as cards and cash – to predominate. Moneyweb
