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Digital Payments in Africa
The dynamics of monetary transactions have witnessed a massive change in recent years thanks to the development of digital payments and wallets. Every aspect of our lives is becoming digitalized, right from our bank cards to our licenses and plane tickets.
The COVID-19 pandemic further accelerated the growth of digital payment by eliminating physical cash transactions due to imposed lockdowns and social distancing norms. This propelled people to spend on e-commerce and, as a result, turn to e-banking. This further gave a push to the growth of digital wallets across the world.
According to Juniper Research, there will be 5.2 billion digital wallet users by 2026, up from 3.4 billion in 2022, as ‘superapps’ push uptake in developing countries. Recent research has shown that for respondents in the Middle East and Africa, digital wallets are anticipated to be consumers’ most favored payment option by 2025.
However, not all MENA countries are progressing at the same rate. The UAE, Saudi Arabia, and Egypt are driving growth, while Nigeria, Israel, and Jordan lag. The share of mobile wallet users in Nigeria is expected to double between 2020 and 2025, but it will remain low compared to other countries in the area.
What Exactly Are Digital Wallets?
This refers to a system of payment where a physical credit or debit card is not required for transactions. Instead, it is an intricate system that stores your payment information and can help you check out various e-commerce platforms as well as help with other online purchases.
Like an actual wallet, a digital wallet allows you to store payment credentials, memberships, coupons, tickets, and so on. This has eased up transactions across the globe since various payment methods can be stored in one wallet and used across different devices. This ability to digitally store information and pay for services by scanning QR codes has been a game-changer in the niche of digital payments.
Penetration Of Digital Payments In Africa
Coming to the crux of our discussion, the landscape of e-banking in Africa got off to a rocky start due to the heavy reliance on cash transactions and highly unbanked sections among the population. It was a mobile wallet (M-Pesa) that started the e-banking movement in the continent. Africa is steadily emerging as a profitable banking market even when the banking industry has been facing a low down in other parts of the world.
The mean banking rate in the African subcontinent was no more than 15%, which enabled mobile telecom services to encourage digital banking. This was done on both smartphones and feature phones via the USSD protocol.
Digital payments in Africa can solve some of the continent’s most glaring economic issues and present numerous opportunities in online banking. Traditional banking structures are far too sparse in the continent, which is why digital banking has seen such success.
In 2018, there were only 120 million bank accounts in Africa, while there were over 340 million mobile money accounts. After the Asia-Pacific region, Africa has become the second-largest emerging market for online banking and electronic payments. Almost 40% of Africans prefer using digital banking as opposed to traditional banking. Research shows that in Kenya, about 6.5% of the GDP in 2017 was a direct contribution to M-Pesa’s digital influence.
To Wallet Or Not To Wallet?
Digital banking and payments have been operating in Africa for many years and are still rising. Mobile wallets are becoming a major form of monetary transaction even in areas that were otherwise largely dependent on cash. As mentioned, this has been greatly facilitated by the COVID-19 pandemic. People were wary of virus transmission through physical cash exchange and shifted to digital payments.
Telecom service providers in Africa have done a great job educating people about the importance of dematerialized money compared to traditional bank accounts. With the rise of FinTech and more innovative money transfer and payment solutions, Africa is set to experience a much more significant change. Using wallets will reduce dependability on cash, increase affordability and convenience, and provide more security to people’s assets.
Enhanced digital solutions will also promote greater financial inclusiveness in the continent. The low growth of traditional banking coupled with a high incidence of mobile phones has made digital banking the answer to the question of financial inclusion in Africa.
The rise in smartphone users and greater internet access is making it possible for more people to avail themselves of the benefits of digital banking and payments. 89 percent of web traffic in Africa is generated through smartphones due to mobile connections being much more affordable.
Services such as M-Pesa, MTN, and Airtel have delivered numerous financial services to the otherwise unbanked sections of Africans (especially in Uganda). This also serves the cause of financial inclusion by digitalizing money, which low-income unbanked populations can use for payments of goods and services and other financial transactions.
Wallets stand out from other payment methods in several ways:
- Transfers and transactions happen in seconds instead of being processed over many business days.
- Payments can be made to and from any bank account.
- Bill payments can be made online through wallets.
- Merchant payments can be made through contactless techniques such as QR Code scans.
- Wallets can analyze financial history and track financial habits through statistics and reports.
- Loan origination becomes much more simplified by using wallets than through in-person banking.
How Are Digital Wallets Profitable To Businesses?
Having a proper payment getaway is essential for any line of business. The frequency of wallet payments is increasing worldwide, and businesses are keen to have a hand in wallet development for their sites.
Digital wallets can be a big marker for increasing sales through better checkout services, lower fees than card companies, and increased security while making online transactions. If businesses want to grow, they must make e-wallets an acceptable payment method. Those businesses that cater to the people’s needs more will see more sales.
Conclusion
Africa has a huge potential for development, and the already-prevalent use of wallets and digital banking in the continent can boost businesses that want to invest in Africa. Businesses can see a rise in engagement and personalization with the use of digital wallets. CIT Vericash offers a state-of-the-art agile wallet platform enabling multiple use cases across numerous markets simultaneously. All your money transfers and remittances network, along with all your collaborators, are combined and aggregated on a unified agile digital platform for all unbanked clients. We help construct a collaborative ecosystem for unified transactions that is truly frictionless.
About CIT Vericash
CIT VERICASH is a division of CIT GLOBAL, an international leading provider of innovative eCommerce and mCommerce software solutions and services with solid expertise spanning 25 years, since its establishment in Toronto, Canada in 1993. By applying CIT Global’s dedicated centers of excellence and its specialized leading products, in cooperation with its strategic partners, the company has delivered innovative and award-winning solutions to its clients in more than 48 countries, serving leading brands from North America, Europe, Asia Pacific, the Middle East, and Africa.