The future of payments in Africa

payments africa

The African FinTech market is gaining rapid traction. A recent EY report puts the growth of FinTech startups in Sub-Saharan Africa at 24% over the past 10 years.

FinTechs—which are companies that combine technology and innovative business models to enable, enhance and disrupt traditional financial services—have grown their footprint considerably in Africa in the past few years. This is mainly because the continent has a less developed financial infrastructure and an unbanked population of 60%. By offering innovative and customer-friendly financial solutions to this population, FinTechs have the potential to revolutionise Africa’s financial infrastructure.

The opportunities for continued growth are promising—Africa has one of the highest mobile penetration levels in the world.  The continent is also currently experiencing a boom in mobile financial services and payment solutions due to the high demand for financial inclusion in the region.

Kenya, South Africa, and Nigeria are the main hubs of the FinTech revolution in Africa. These areas boast relatively more robust FinTech ecosystems compared to the rest of Africa. They also drive innovation and shape the future of FinTech in Africa. Kenya, for instance, is currently the world leader in mobile money transactions mainly due to the widespread use of MPesa across the country—about 45% of Kenya’s GDP is processed through MPesa.

Growth in payments

Today, startups in the payments and lending spaces are prevalent when it comes to the types of FinTech services being offered across the continent. Why payments? The fundamental gaps in offering financial services which the FinTechs can give revolve around payments. The rapid growth of the payments industry in Africa can be attributed to the governments’ desire to boost financial inclusion and reduce the use of cash.

African nations have made huge strides in their attempts to meet the need for financial inclusion. We’ve seen constant innovation and expansion of new technologies in the field of payments, from using low-cost mobile money for remittances to enabling digital payments and online banking services. It is no surprise then that Mark Zuckerberg visited Nairobi in September 2016 to learn about mobile money and payments in Africa.

Over the next ten years (and beyond) we’re set to see even faster changes in the payments industry, building on the accelerating growth in digital payments and the advent of new and disruptive technologies such as blockchain.

Besides, regulatory support and accelerating customer adoption of these new technologies are spearheading some key developments in Africa’s payments industry. These include:

Social payments – payments through social media e.g Alipay, WeChat etc.

NFC technology – contact-less payments that use near-field communication (NFC) technology to exchange data between two devices—like your phone and a payment terminal.  Examples are Apple Pay, Samsung Pay, and Android Pay eWallets.

Bluetooth low energy – making payments from any device anywhere in the store.

Blockchain technology – using distributed ledgers to facilitate fast, secure, low-cost payment processing services.

Payment is one area that blockchain can majorly transform in terms of cross-border payments, remittances, and micro-transactions. From large banks and enterprises optimizing global liquidity, to retail stores accepting payment in digital currencies, to new forms of customer identification for retail transactions, blockchain is permeating the payments landscape at an accelerated space.

Dolla – Driving Africa’s payment ecosystem

One FinTech company leading the blockchain payments revolution in Africa is Dolla. Dolla is a blockchain-based payment solutions provider for sending money that aims to achieve worldwide merchant adoption of digital currencies. The payment platform is easily accessible to all customers and businesses around the world, including the unbanked population in Africa and other emerging economies.

MPesa has made huge progress in simplifying domestic transactions. But when the payment has to cross border transactions fees usually soar up to 31%. Thus it has become increasingly difficult to connect the entire population of Africa through mobile payment infrastructure. Dolla has come in to unify Africa’s fragmented payments ecosystem through a single secure platform that allows local merchants to accept payments instantly from anywhere in Africa. Customers can also pay for goods and services seamlessly from their digital wallets irrespective of where they live in Africa.

Dolla’s ultimate goal is to transform international payments by utilizing blockchain technology to facilitate nearly free payments that are fast and secure—its throughput rivals that of Visa at 10,000 TPS (transactions per second). Transactions are also incredibly affordable at just 1 cent per transaction.  Dolla is already making inroads into the African market. The company plans to continue to set up brand ambassadors in countries across Africa such as Kenya, Cameroon, and Ghana, even as it seeks to drive growth across the continent.

With services such as Dolla, small merchants can expect to expand their businesses across Africa, grow their brand and tap into the accelerating growth of online purchases.

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About the author

Vincent Olago

Vincent Olago

Vincent Olago is the Managing Editor of Ledger Africa and has been active in the blockchain space for three years now. He's passionate about entrepreneurship and the potential of disruptive blockchain technologies to reshape our world. He supports startups to tackle blockchain challenges, address strategic problems and optimize growth.