By 12 March 2021 | Categories: feature articles


The Covid-19 pandemic has exposed the Achilles heel, as well as a ripe opportunity, in sub-Saharan Africa’s trade and payments landscape. Chipo Mushwana, Nedbank Executive of Emerging Payments, explores the challenges and solutions to support the continent’s consumer and business population in economic recovery.

Various studies on financial inclusion estimate that approximately 40% of adults in sub-Saharan Africa don’t have access to formal financial services. Most people in Africa engage with financial services through a mobile device only, and cash is still their primary means of transacting.

In South Africa, for instance, 9 out of 10 payments made today are in cash, and are for less than R1 500. In Nigeria, 95% of transactions are cash-based and 60% of adults don't have bank accounts, according to a report by EY. These are often regular, low-value, day-to-day purchases that are critical for the survival of many families and individuals.

The dominance of cash in most economies across the continent has always been a conundrum for merchants looking for growth beyond their immediate communities. This is especially the case across cities and countries where the issue is becoming even more urgent during the Covid-19 pandemic, as the demand for digital, contactless payment systems intensifies around the world.

At the centre of the digital payments ecosystem are real-time gross settlement (RTGS) systems that financial institutions rely on to process payments between each other. The most significant challenge in sub-Saharan Africa has been linking the RTGS system with the overwhelming cash economy.

With an estimated half a billion people out of a population of 1,2 billion accessing the internet, as well as a growing middle class, there lies an opportunity to migrate the majority of these cash payments to the digital space, supporting more secure and convenient payment methods.

Due to both health and security concerns, merchants and retailers seek to steer consumers away from using physical cash, and contactless payment or near-field communication (NFC) is one of the solutions expected to grow rapidly in the medium term.

NFC systems enable consumers to simply wave their smartphone across a reader to pay, which is faster and more convenient than inserting a card.

Contactless payment is also more secure, as it transfers the protected data to the point-of-sale device immediately. Its growing relevance is evident in the fact that companies such as Google, Samsung, and Apple have already developed their own contactless payment systems.

At the same time, there is a steady demand for mobile point-of-sale (mPOS) technology, as merchants endeavour to make payments safer and faster. The introduction of low-cost acceptance solutions, such as 'tap on phone' by Nedbank, signal a new era in payment acceptance, changing the point-of-sale space and freeing merchants from their brick-and-mortar limitations.

Through app development and advancements in NFC technology and QR codes, smartphones can now become mPOS devices, which takes away the need for conventional devices to transact.

Still, very few digital channels and instruments integrate well with the cash economy in Africa, including NFC and mPOS. An example of one that does, is the e-money instrument, which is usually facilitated through an agent channel – a pathway that interacts with the cash economy as many consumers cash out through these agents.

Mobile wallets have also proven to be an increasingly popular payment method in recent years, most notably in Kenya and Nigeria, where internet penetration and coverage is growing rapidly. Kenya’s mobile money market, for instance, has a 100% penetration rate due to many consumers having multiple SIM cards.

Mobile wallets mimic physical wallets, and let consumers send, receive, as well as store money without having to open a formal bank account.

According to Global System for Mobile Association’s 2019 State of the Industry report on Mobile Money, sub-Saharan Africa has 469 million registered mobile money accounts, accounting for nearly half of the 1,04 billion mobile money accounts registered globally. This is increased steadily in 2020, as mobile wallets enable consumers in the most remote regions to pay for utilities, buy everyday goods and join rewards programmes.

The constant need for improved security protocols on these platforms will also accelerate the use of biometric authentication, including fingerprint scanners, facial and iris recognition, heartbeat analysis, and even vein mapping.

In coming years, banking and payment innovations will see radical changes that will benefit both merchants and consumers in sub-Saharan Africa, as financial services institutions seek partnerships with fintechs and non-financial businesses that consumers trust. 

The ever-changing needs on both ends, coupled with security and health concerns, will determine which solutions stay and which will fall by the wayside, resulting in a financial services sector that is completely different from what traditional banks look like today.


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