13th November 2023 11:41:40 AM
3 mins readAs of June this year, the AfricaNenda report on the State of Inclusive Instant Payment (SIIP) in Africa for 2023 reveals that Instant Payment Systems (IPSs) on the continent executed a remarkable 32 billion transactions, amounting to an astonishing US$1.2 trillion.
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Sabine Mensah, Deputy Chief Executive of AfricaNenda, conveyed to journalists in Addis Ababa that these figures are, in fact, conservative, based on data collected from only 22 out of the 32 countries currently equipped with active instant payment systems in Africa.
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Additionally, Mensah highlighted the impact of currency depreciation, noting that as of June 2023, there was an average of approximately 30 percent depreciation of African currencies against the US dollar. Therefore, if the transaction value were calculated based on exchange rates prior to June 2023, the total transaction value would have far exceeded US$1.2 trillion.
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Despite these impressive numbers, Mensah pointed out that the availability of data from central banks and payment switches in Africa remains a challenge. Out of the 22 countries that provided data, only five came directly from their respective central banks, while the remaining 17 were bits and pieces of information gathered from the internet.
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Mensah also emphasized that out of the 32 active IPSs, 29 are strictly domestic, with only 3 facilitating cross-border payments. Furthermore, not all 32 IPSs are inclusive, according to Mensah.
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“Inclusivity is a spectrum – it means the system must be relevant to all – save time – save money – ensure easy payment (interoperable) – facilitates relevant use cases – the most basic phone should have access to all use cases – send money – receive money – pay to government – receive government support (social payments) – that way the value proposition is compelling enough to drive wide usage,” she said.
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In the current landscape, instant payment systems (IPSs) across the continent exhibit diverse levels of inclusivity, ranging from basic to advanced stages. However, none has reached a mature level where individual safety is unequivocally assured, according to the Deputy CEO of AfricaNenda.The 32 active IPSs are spread across 21 countries, with 7 of these countries hosting multiple IPSs.
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Additionally, 17 countries are in different stages of planning to launch IPSs, and there are three regional IPSs in the planning stage. However, 27 African countries still lack IPSs, underscoring the significant distance to cover in achieving a fully inclusive digital economy.Despite Africa boasting one of the highest mobile penetrations globally, over 400 million African adults remain financially excluded.
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Connectivity issues, safety and security concerns, high costs, and a lack of digital skills pose challenges for those seeking to enter the digital financial sector.The report also delves into Consumer Research in five countries, uncovering barriers related to access to infrastructure, devices, connectivity, and issues of trust, fraud, and affordability hindering the transition from cash to digital.
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Furthermore, an earlier SMEs research by AfricaNenda revealed that existing services do not effectively address the needs of SMEs on the continent. Challenges include delayed payment confirmation, lack of interoperability across borders, uncertainty in confirming payments reaching the intended recipient, poor or absent connectivity, and costly services.
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Regulatory disparities across borders, such as varied licensing regimes, and gaps in identity confirmation between sender and receiver countries, were identified as additional challenges hindering the seamless flow of funds.
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“We at AfricaNenda are very willing to provide the technical and capacity building assistance to bridge the gap, but we need data to do the analysis that will drive the ecosystem towards impactful inclusion for all Africans,” she said. “We make the information available and share best practices in the hope that African countries are able to learn from that instead of seeking to reinvent the wheel.
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”Sabine Mensah, emphasizing best practices, pointed to India's UPI and Brazil's PIX as noteworthy examples that African countries can draw inspiration from. She encourages the exploration of these models to elevate the standards of inclusive instant payments across the continent.Mensah underscores the pivotal role of media advocacy in propelling the ecosystem forward.
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She stresses the importance of concerted efforts at both the regulatory and operator levels to establish interoperable, safe, affordable, user-friendly, and inclusive instant payment systems in African countries. Such systems, she believes, will foster consumer confidence and facilitate cross-border trade, aligning with the objectives of the African Continental Free Trade Area (AfCFTA).
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The comprehensive report, launched on November 8, 2023, was a collaborative effort involving AfricaNenda, Co-Develop, the World Bank, and the UN Economic Commission for Africa (UNECA).
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