Sub-Saharan Africa is next frontier for digital payments

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In the Sub-Saharan Africa (SSA) region, cash is still king, but there is plenty opportunity for the region to capitalise on digital payments.

This is the sentiment shared by Aida Diarra, senior vice-president and head of Visa in Sub-Saharan Africa, at the virtual Visa Innovation for Inclusion Summit held yesterday.

The summit featured key stakeholders from the payments industry in the region, focusing on how the African continent can harness innovation for growth.

Despite the pandemic, which slowed down GDP growth over 2019 and 2020, Sub-Saharan Africa is still expected to grow at 3.4% in 2021 and 4% in 2022, said Diarra.

According to Diarra, what makes SSA a region with a lot of opportunity is that the majority of today’s spend happens in cash, with estimates showing that only 10% of payments are currently digital.

“This gives us tonnes of opportunity to digitise payments. Only six markets out of the 50 have a PC (personal consumption) expenditure penetration greater than 5%.

“When you combine this with the fact that there are 261 million people today that do not have access to financial services – and combine the fact that there are less than two million businesses that accept digital payments – it creates an environment where innovation has to play a role to drive financial inclusion and commerce across the continent.”

Carol Evans, Rand Merchant Bank receipting solutions head, pointed out: “Given that still only a relatively small percentage of total payments are digitised, I think this provides a significant gap with respect to any future solutions or innovations.

“There exists an opportunity for a payment or technology provider to provide solutions across the full business payment value chain, which is important. These are value-added services around optimising items such as reconciliation, integration, forecasting and data analytics, for example.”

Aida Diarra, senior vice-president and head of Visa in Sub-Saharan Africa.
Aida Diarra, senior vice-president and head of Visa in Sub-Saharan Africa.

Diarra explained that SSA has different levels of maturity when it comes to payments, noting SA among the more mature and developed markets.

Some 72% of SA’s population has access to a bank account and is digitally engaged, she stated. Compared to consumers in other parts of the Sub-Saharan Africa region, South African consumers transact, on average, twice as much as the rest of consumers across the continent.

Referencing other markets, she said in the Democratic Republic of Congo and Ethiopia, which is a combination of some 200 million people, the volume of payments is about $19 billion, but less than a percentage point is today digitally processed.

“Technology is going to be fundamental for us to drive further inclusion. For example, during the pandemic, more people have decided to do business and transact online. From a consumer perspective, it was imperative and they discovered the convenience of accessing e-commerce.

“Even after the pandemic, consumers plan to continue to leverage digital platforms because commerce and payments are easier.

“On the flipside, merchants who didn’t see many people come to their retail locations understood that they needed to get online to be more resilient.”

Regional tech powerhouses

Outlining some key technology and innovation milestones within the region, Diarra pointed to Cape Town being considered as the Silicon Valley of the region.

According to Wesgro, theofficial tourism, trade and investment promotion agency for Cape Town and the Western Cape, the Cape Town-Stellenbosch corridor contains 450 tech firms and employs more than 40 000 people, making the ecosystem bigger than Nairobi and Lagos combined.

Diarra highlighted that Cape Town is ranked as the fastest growing region for foreign direct investment.

Turning to Nigeria, the Visa official indicated the fintech start-up environment has been vibrant. “Fintechs have raised more than $600 million between 2014 and 2019. The past two years have confirmed these trends.”

East African nation Kenya can count Safaricom’s mobile money transfer service, M-Pesa, as a unique platform for the continent, she said. “They have demonstrated how mobile money payments can drive financial inclusion across the region.”

While COVID-19 has slowed down investment in innovation in SSA, Diarra concluded that the foundations are “so strong” and opportunities are “so huge” for innovation to continue to drive more payments across the region and globally.

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