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Tapping Into the Potential of Africa’s Payment Industry

Boaz Gam

Boaz Gam


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Article content
  1. Africa’s Payments Landscape in 2022: What’s It Like?
  2. Challenges Faced by Africa’s Payment Industry
  3. How Are Local Banks Supporting Innovation?
  4. Making the Most Out of the African Payments Landscape

The Untapped Potential of Africa’s Payment Industry

While Africa’s emerging market offers plenty of growth opportunities for various types of businesses, organizations that deal with digital transactions are the ones that will explore the local potential to the fullest. But what exactly can the merchants and PSPs entering the continent’s payments ecosystem expect?

If you are wondering what Africa’s current payment landscape is like and want to find out the forecasts regarding the region’s future development, this guide is for you. Read ahead for valuable insights!

Africa’s Payments Landscape in 2022: What’s It Like?

The Untapped Potential of Africa’s Payment Industry

Africa’s population is rapidly expanding and is set to reach 1.7 billion people by 2030, which will inevitably lead to economic growth. However, what makes this continent even more attractive for businesses and PSPs, is the fact that Africa is the global leader in the speed of mobile penetration.

In 2018, 44% of the continent's population owned a mobile phone, while in 2020, the figure grew to 65%. If such a pace persists, the number of unique mobile subscribers is forecasted to reach 634 million by 2025.

Hence, it is no surprise that Africa is also the leading continent for mobile-money services. The value of such transactions in the region grew by 39%, from $495 billion in 2020 to $701.4 billion in 2021, equalling 70% of the world's total mobile money value.

In sub-Saharan Africa, over 60% of adults have a mobile money account. Besides, great opportunities to unlock similar figures exist in Nigeria, Ethiopia, and Egypt, which altogether makes it evident that the future of African banking is mobile.

Challenges Faced by Africa’s Payment Industry

The Untapped Potential of Africa’s Payment Industry

While the African payments landscape is very promising, it still faces a number of challenges. Here are some aspects new market entrants should keep in mind:

  • Uneven development pace. Africa is a diverse continent, where one region may vary significantly from another in terms of technology adoption. For instance, while Ivory Coast favors visa-branded cards, 40% of Tanzanians prefer using mobile network operators (MNOs) like M-Pesa. For businesses and PSPs entering the market, this signifies the need for thorough market research and flexibility in adjusting to local payment methods.
  • Inefficient cross-border transfers. Cross-border transfers within sub-Saharan Africa have to travel via multiple payment corridors, time zones, and banks, which results in slow transaction speed and extremely high fees.
All in all, these challenges come down to the lack of interoperability between financial institutions (FIs) and payment networks across Africa. However, as the adoption of new technology becomes more widespread, we are sure to see a smoother payment flow within the continent and outside of it.

One of the key forces in accelerating the spread of digital payments is the local banks.

How Are Local Banks Supporting Innovation?

FIs play a significant role in creating new opportunities for digital payments by launching and promoting the adoption of mobile banking apps.

Banks also encourage consumers to use Unstructured Supplementary Service Data (USSD) payments. These are transactions that can be conducted offline with the help of shortcodes.

In Nigeria, this initiative has helped the country to make significant progress on the way to going cashless by providing all members of society with the opportunity to access basic banking services via their phones, regardless of the availability of an Internet connection.

Making the Most Out of the African Payments Landscape

The Untapped Potential of Africa’s Payment Industry

The African payments landscape has everything it takes to become a coveted space for businesses and PSPs, namely:

  • Growing and tech-savvy population
  • Society open to innovation
  • Increasing access to mobile money accounts
  • High rate of mobile penetration
  • Strong prospects for achieving a cashless economy

Hence, it is safe to assume that in the foreseeable future, FinTech companies will succeed in tackling the interoperability challenges across the country.

In fact, already now, Africa’s key payment ecosystem players are working on unifying the diverse banking processes, systems, and tech solutions. For instance, the Nigeria Interbank Settlement System (NIBSS), assists banks in removing bottlenecks related to interbank funds transfer and settlement.

While Africa’s payment industry is yet to experience its bloom, it is still possible to enter this market and conduct profitable sales with the support of advanced FinTech solutions. Payneteasy is here to help you maximize your business returns, regardless of your location. Reach out to us for a consultation regarding your upcoming project!

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