EFSA | The Evolution of the Payment Landscape in Africa

While South Africa may lag behind other countries in some areas, its banking and payments industry is rated among the best in the world. The entire continent has needed to be resourceful to innovate with payment methods, to serve the banked, underbanked and unbanked.

Karen Nadasen, CEO of PayU South Africa and Chairperson of The Ecommerce Forum South Africa (EFSA), “There is an incredible pace of change across Africa. I’ve been in technology for a long time, and it’s been amazing to track the improvements you can make in people’s daily lives, specifically in relation to payments technology and financial inclusivity. For example, consider that we offer over 400 different payment methods at the moment. That is a key indicator of the diverse payment landscape on the continent.”

Seven developments that are transforming the payment space:

Mobile Money
Limited access to banks during the pandemic and a growing trend toward a safer, cashless society has seen Sub-Saharan mobile money transaction volumes increase 23 per cent to $490 billion last year, greater than the GDP of Nigeria, the region’s biggest economy. Active users increased by 18 per cent to 159 million, according to the GSMA, an industry body.

Such growth spurred The Brookings Institution to declare that Africa will soon bypass traditional banking systems as the world’s second-fastest-growing payments and banking market. Notably, the continent is already the largest adopter of mobile money transfer systems, comprising nearly half of the globe’s registered mobile money customers, approximately 70 per cent of global mobile money transactions, and two-thirds of the transaction volume by value.

The significant number of underbanked or unbanked Africans, and the current low penetration of cellular and internet networks in rural Africa, suggests mobile money services still have considerable growth potential in the region.

A recent PayU report, The Next Frontier, highlighted unprecedented consumer spending growth in 19 e-commerce high-growth markets that had been overlooked before 2020. It revealed that South Africa’s m-commerce is up 35 per cent, Nigeria is now Africa’s biggest e-commerce market, and Kenya is primed for massive growth as African countries reach an e-commerce adoption tipping point, especially in fashion beauty, education, and digital goods.

The gradual rollout across Africa of 4G networks, along with affordable smartphones made by Chinese vendors like Transsion, Huawei Technologies and Xiaomi, has seen South Africa grow its internet penetration to 56 per cent, with Nigeria and Kenya at 46 per cent and 31 per cent respectively. However, while this is progress, there is also room for modest improvement in this area.

“We are seeing more investment coming into other African countries. I think what is going to be very interesting is how we start to make changes to the infrastructure to start to reduce data costs further and faster, and then how we move forward from an open banking perspective,” Nadasen adds.

Credit solutions
The payments ecosystem has seen a significant rise in credit solutions to underserved consumers. Companies like Mobicred, RCS and Lulalend all offer solutions to consumers and businesses, offering streamlined and simple online applications, SME funding, and companies such as Payflex and TymeBank offering Buy Now Pay Later (BNPL) and varying payment terms.

A hub to integrate across borders
The African Continental Free Trade Area (AfCFTA), the largest in the world, commenced at the beginning of January 2021, uniting 54 of the 55 African Union nations. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty by reducing red tape and simplifying customs procedures, making it easier for African businesses to integrate into global supply chains, which would boost income gains by $292 billion.

“Our position as an emerging market leader means we have the vantage point of bringing learnings in many regions together. We have the expertise to ensure ease of integration and support for cross border transactions via our PayU Hub, extending to the 50 markets that we are operating in,” she says.

FinTech growth
PayU operates in 50 emerging economies worldwide from Latin America, India, Central and Eastern Europe, and Africa, employing over 3000 people globally representing 43 different nationalities. In Africa, they have a physical presence in South Africa, Nigeria, Kenya, and are now putting down roots in Ghana. Backed by Prosus, PayU has been on a significant acquisition spree globally over the last two years, acquiring BillDesk for $4.7bn, fintech startupPaySense for $185m, Iyzico for $165m, and Wibmo for $70m.

“The way PayU helps grow small and medium-sized businesses on the continent is by taking many of the pain points away. Our partnerships with various technology companies and payment providers give our merchants a way to access more markets and offer more choices to secure a transaction,” concludes Nadasen.

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