By CEO of PayU Africa, Karen Nadasen
As internet connectivity permeates every corner of Africa, the everyday exchange of money is profoundly changing – increasingly shaped by the continent’s burgeoning fintech sector. This shift, driven by digital innovation in payment processes, is turning what was once an informal network of transactions into a robust, inclusive financial system.
Cashless payments technology is set to leapfrog established banking tools, and with many Africans’ first financial services experiences taking place through their phones, telco-fintech players are likely going to dominate local markets in the coming years – especially in South Africa, Nigeria, Egypt, and Kenya.
According to Boston Consulting Group (BCG) and QED Investors’ Reimagining the Future of Finance report, the African fintech market will be worth around R1.2 trillion by 2030, making it world’s fastest-growing region for fintech revenue. The key African markets identified in the report include two countries, South Africa and Nigeria, whose own economic and fintech strategies are focused clearly on financial inclusion.
In February, South Africa’s National Treasury released a budget review with a section devoted to financial innovation to “promote the adoption of digital payments, which will help to improve the lives and livelihoods of marginalised groups”. Key to this is supporting small and informal businesses through payment innovation, with projects set down over the next few years to improve community digitalisation, digitising informal and low-income worker payments, and cross-border trade.
Similarly, Nigeria’s revised National Financial Inclusion Strategy has for years highlighted cashless payments as a core tenet of financial inclusion, as e-payments reduce the cost of cash management and hence the cost of issuing legal tender.
Together, these nations illustrate the profound impact that targeted financial policies paired with innovative fintech solutions can have on a country’s economic landscape. While cash remains predominant on the continent, fintech offers a promising solution for expanding access to financial services, particularly for the vast number of individuals who remain underserved by traditional banks.
How Digital Payments Enhance Financial Inclusion in Africa
In regions where banking infrastructures are sparse and the costs of setting up physical branches prohibitively high, mobile money platforms and digital wallets present a more viable and less costly alternative. These technologies not only offer basic transaction capabilities but also provide platforms for micro-loans, insurance, and savings products tailored to the needs of the rural and peri-urban populations.
This impact also extends into the business realm, particularly for small and medium-sized enterprises (SMEs) that form the backbone of many African economies. Digital payment mechanisms allow businesses to manage cash flow more effectively, accept payments electronically, and access broader markets beyond their immediate locales. This is evident as 64% of South African micro business owners in 2021 believed contactless payment technology is safer and more efficient.
Moreover, fintech companies are increasingly offering innovative financing options that do not rely solely on traditional credit scores, democratising access to financial resources and enabling a surge in entrepreneurial activity.
Service Providers are Taking Heed
Recognising the transformative impact of fintech, payment service operators are actively innovating across Africa to meet evolving market needs and drive financial inclusion. Improving payment ecosystems is a core part of PayU’s ongoing strategy for promoting financial inclusion worldwide. As a leading service provider in South Africa, we understand the importance of fast, simple, and secure payment processes for merchants and consumers.
Over the past few years, we have been expanding our footprint in Africa, focusing on adding local payment methods to reach wider customer segments, especially the underbanked yet digitally savvy populations. For example, we offer Scan to Pay, a popular payment method in Nigeria, allowing merchants to display local QR codes. This enables businesses to avoid unnecessary third-party involvement and fees by allowing their customers to scan a QR code with their banking apps and pay directly from their bank accounts.
Additionally, we are closely monitoring the real-time payment trend that is starting to make waves across the continent, following its success in emerging markets like Brazil and Poland. In South Africa – and soon to be integrated into other markets – PayShap celebrated its first anniversary earlier this year with more than a million transactions. This digital payment solution allows users to receive immediate payments straight into their bank accounts, regardless of the bank they use.
Furthermore, we are committed to facilitating intra-African trade. This is exemplified by our recent efforts to open market opportunities in Ghana to our merchants, providing greater reach across the continent.
As we stand at the forefront of this digital financial revolution, it is crucial for all stakeholders – governments, businesses, and fintech innovators – to collaborate and ensure that these technologies not only thrive but are accessible to everyone. By doing so, we can fully harness the potential of fintech to bridge gaps in traditional banking, empower entrepreneurs, and catalyse growth throughout the continent.