Succeeding in emerging markets: Spotlight on Payments in Africa

Aside from the continent’s rapidly-expanding population — set to hit 1.7bn by 2030¹— a key draw for many businesses is that Africa’s uptake of digital payments is among the quickest in the world.²

It also has the fastest-growing rate of mobile penetration, with 44% of the population owning a device in 2018, and unique mobile subscribers expected to reach 634m by 2025.³

In fact, mobile payment in Africa is already a $456bn market with 469 million user accounts in 2019.⁴

In sub-Saharan Africa, specifically, over 60% of the adult population has a mobile money account — and a notable opportunity exists to unlock similar growth in the continent’s mobile money ‘sleeping giants’ such as Nigeria, Ethiopia and Egypt.⁵

However, while two-thirds of adults in sub-Saharan Africa currently use mobile phones, there still exists little trust in online payments — which new market entrants should be wary of. This has resulted in a large informal and fragmented payment system, comprising banks, mobile wallets, local card networks, and other payment providers who help connect these parties to create a seamless experience for all users.

While many African countries are having some success in figuring out ways to improve payments inside their own borders, their locally-biased focus can in some ways be seen as a weakness for the African economy as a whole. While the African Continental Free Trade Agreement (AfCFTA) has tried to unite the continent into a single market with free movement of business persons and investments, the COVID-19 pandemic has undoubtedly stalled its implementation.

At $8.97, cross-border payments within sub-Saharan Africa have the most expensive remittance structure, too.¹ With money having to move through multiple payment corridors involving numerous time zones and banks, they can also be really slow.²

Banks are driving innovation in mobile payments by launching and driving adoption of mobile banking apps. They’re also promoting the use of Unstructured Supplementary Service Data (USSD) payments — where people can make transactions using shortcodes without the need for internet connectivity. In Nigeria especially, this is helping the country progress its cashless ambitions by giving both urban and rural populations access to basic banking services on their phones, either with or without the internet.¹ In 2018, USSD transactions increased by 35% to ₦261m.²

Overall, while efforts have been made to achieve a smooth cross-border payment system in Africa, the banks, mobile wallets and other payment providers have not yet succeeded. Looking at Nigeria in particular, even just a few years ago, the majority of payments flowing from the country to the rest of Africa went through Europe or North America.

With its young, growing and tech-savvy population, Africa is well positioned for businesses looking to add value. Longer term, as FinTech firms innovate and become more established in Nigeria and across the continent, the ‘teething troubles’ around payment processing will continue to be addressed

For example, the key players in Africa’s payment ecosystem are finding more ways to unite multiple banking processes, technologies and systems. A good example is the Nigeria Interbank Settlement System (NIBSS), which is helping banks come together to remove bottlenecks associated with interbank funds transfer and settlement.¹ There’s also Flutterwave, whose payment gateway system allows businesses to accept various payment methods including Local Bank Payments and International Bank.

Africa’s FinTech payment system is undoubtedly large and untapped — and successfully uniting all the banks under one payment system offers enormous potential for the industry and continent as a whole. Already, payment in Africa is a $400bn+ industry,² with opportunity for future growth³ as more and more business operations become established on the continent.

Despite the challenges of Africa’s nascent online payment ecosystems, the continent has a lot to offer many businesses. Its rapid adoption of digital payments, widespread use of mobile devices, and growing access to mobile money accounts means its population clearly has the desire and the will. And, as banks and FinTech firms continue to innovate, they will soon have the way.

For more insights, guides and articles on how to optimise your international payments for business growth, head over to the Market Finder website.

^{About Flutterwave: Flutterwave helps businesses and customers make and accept payments from anywhere in the world. It currently processes payments in 150 currencies and has an active presence across more than 10 emerging markets.}