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The discourse around the African payments ecosystem is complex. This is to be expected given the intricacies of the industry and the diverse challenges faced by African businesses.

Attending a BankservAfrica and SWIFT hosted a panel discussion at Sibos 2022, titled, ‘Forging Ahead To Africa’s Payments Future’, Trade Finance Global’s (TFG) Annie Kovacevic spoke with Mpho Sadiki, head of realtime payments at BankservAfrica, to learn more about what’s in store for the continent. 

COVID-19 as a driver for African payments ecosystem 

The payments sector has seen substantial development over the last few years. COVID-19, though having far-reaching ramifications, is responsible for positive advancements.

Sadiki said, “If you look back in the last two years digital, invisible, frictionless payments have taken up momentum globally in different shapes and forms.”

Sadiki emphasised that contactless payments, or more generally, e-commerce growth in the form of ‘invisible’ payments, has really taken flight in the African retail space. 

Pre-COVID, e-payments would have probably accounted for 1% or even less of total trade. Now, the number has increased to 7-8%. 

This growth in adoption has extended to wholesale payments as well. In the past, there was no real demand for real-time payments. The process was slow, and there was little emphasis on enriching the data ecosystem. 

But now, interest has been piqued. 

Sadiki said, “You’re starting to see, in high-value payments, the need for more third-level data––more enriched data––in the payment flows.” 

Overall, there seems to be a conscious shift toward enhancing these systems through various lenses, whether that be an ACH perspective––starting to think about how to build the infrastructure and modernise it––to a platform-based ISO 20022 payments ecosystem. 

High-value payments and data sparsity 

The notion of data sharing is often met with widespread reticence. For Sadiki, this is a result of two key issues.

On the one hand, there is a real worry from an anti-money laundering (AML) and know-your-customer (KYC) perspective; both counterparties need to know where they’re sending to and who they’re sending to.

On the other hand––one which usually bears more weight––is the fact that counterparties need to build upon trust and confidence between participants so that the required systems can really take form. 

There are clear advantages to engaging in data sharing. Sadiki said, “Banks see the need for that enriched level of data. They see the need to know what they [customers] are paying for and where they paid for it.” 

Therefore, it is about cultivating those partnerships to create a centralised player that is able to achieve that. 

Sadiki added, “It’s a long journey and I don’t think it will be that easy to solve.”

SMEs and low-value payments 

In South Africa and many other parts of the continent, small- and medium-sized enterprises (SMEs) are generally viewed as the bedrock of economies, driving employment and trade. 

However, in the majority of cases, they are the ones to face the largest hurdles. The most significant pain point is the low-value, real-time payment aspect; an integral part of businesses operating on the ground 24 hours a day. 

Sadiki said, “If we can shift from a world where an SME waits for payments during the week––getting no real payments over the weekend––to a world where the payment happens instantly…they will be able to have cash flow available immediately.” 

Right now, one of the largest hindrances to a business’ cashflow is not knowing where their money is within the process. In this regard, implementing faster and more transparent payments will enable businesses to grow more efficiently. 

Sadiki said, “A lot of trade today works on promise-to-pay. 

“In some cases, delivery is held until the payment has been cleared, at which point delivery is then dispatched. And if I’m a micro-, small- and medium-sized enterprise (MSME) in a rural area, this means I then need to go to my bank and cash that digital transaction.” 

These lengthy stages can severely impede the cash flow within a small business. 

However, digitising the ecosystem removes these hurdles, meaning that MSMEs will not need to go to a bank to deposit any of the cash––something that is really underestimated in developing markets. 

The future of African payments systems

Looking toward the future, it is easy to see a cognitive shift from cash-based payments to digital payments, facilitating the easier deployment of payment solutions.

You’re seeing more and more urbanisation in Africa which means more people are starting to consume technology services. This urbanisation will play a large role in simplifying channels through digitisation. 

Cash remains a reality, but Sadiki added, “Industry players cannot ignore e-currencies. 

“That’s a rallying call to the regulators: if you do nothing, the market will self-regulate.”

It may be the case that companies are waiting for the rollout of legal frameworks, but this hesitation could manifest to a point of disadvantage.  

“The very essence of regulation is to advance. Seeking solutions to facilitate low-cost, inclusive access has already taken off. 

“By the time companies wake up to it, they might not be able to gain access, as the market will have already self-determined the price.”