This month's newsletter focuses on the disruption of the formal banking system in the Africa region, particularly as regards the rapid growth of the digitalisation of payments.
The use of cash across the continent continues to thrive, however, technology and innovation are enablers which promote financial inclusion for consumers – the use of mobile money, cryptocurrency and increased offering of buy-now-pay-later are all examples of solutions which have helped to facilitate the movement of money. The increased digitalisation of payments can present its own challenges such as the difficulty of regulating payments outside of traditional financial services and the mitigation of risks such as identity fraud, money laundering and the like. That said, it is widely acknowledged that economic growth can be scaled up by making digital payments systems more efficient and more accessible to all, therefore governments are increasingly playing an important role in fostering innovation, including but not limited to ensuring that there is a regulatory framework which works well alongside a digital payment ecosystem.
We hope you enjoy this month's newsletter, please do get in touch if you would like to discuss.
Can disruption be both devastating and inventive. Harvard professor Clayton Christensen believed so. And it makes sense. It begins when a firm targets overlooked – typically low-profitability – segments of a market, or creates a new market where none existed, and offers low-cost solutions. The entrant gains a foothold, eventually moves up-market and soon co-opts mainstream customers: the entire process of which is “disruption.”
Africa has all the makings of a world-beating fintech ecosystem. A perfect storm of demographics, technology and opportunity have set the stage for Africa, home to some of the world’s fastest growing economies and dynamic tech centres, to become a global fintech powerhouse.
The survey, which global digital payments solution provider Visa published, showed that an estimated (71 per cent) of businesses in Kenya use cash as a means of payment, compared to higher use of cash by businesses in South Africa (91per cent) and Nigeria (94 per cent).
Small and Medium Enterprises (SMEs) are going to enjoy business expansion, seamless access to payment system as MFS Africa, Africa’s largest digital payments network joins Pan-African Payment and Settlement System (PAPSS).
Africa and Asia are the home of mobile money, where the shift to digital wallets is in full swing in countries with high smartphone penetration. A recent report points out the extent to which African and Asian consumers are embracing digital payments.
As of December 2020, approximately two-thirds of total global mobile money transactions were driven by users in sub-Saharan Africa (SSA), with a transaction value of 490 billion USD. The region recorded roughly 548 million registered mobile money accounts in 2020, with 159 million of these registrations identified as active accounts. Mobile money has been touted as a revolutionary tool for expanding access to financial services in low resource environments. With just a mobile phone, users are able to quickly transfer money at low cost and, typically, without needing access to an existing banking account.
The number of active mobile money accounts increased from 66.59 million in January to 66.88 million in October 2021. With the increased penetration and mobile phones in Africa, adopting a digital cashless mode of payments is on the rise.
Eleanor, a mother of two in the North of Madagascar, has registered her micro-business with the tax department for mobile payments. With this new account, she can receive funds, and pay for goods and services, building a transaction history that could help her if she seeks to obtain a loan.
The World Bank’s Madagascar Financial Inclusion Project shows the potential for digital financial services and Fintech to contribute to economic recovery and drive financial inclusion in the island nation, which has long been exposed to climate change.
Central banks are launching digital currencies across Africa. But government attempts to own the retail payments space are leading to failure.
When Ben Ofosu Appiah heard that Ghana’s finance minister was slapping a new levy on mobile money transactions, his first thought was: Here we go again.
