Driving Africa's financial inclusion: Leverage tech, youthful population to shape future of payments — Dr Addison
Driving Africa's financial inclusion: Leverage tech, youthful population to shape future of payments — Dr Addison

Driving Africa's financial inclusion: Leverage tech, youthful population to shape future of payments — Dr Addison

In the face of the enormous potential with payments systems on the continent, the Governor of Ghana’s central bank wants African countries to leverage on the large technological savvy and youthful population to shape the future of payments to drive financial inclusion, intra-trade activities and promote economic growth overall.


Dr Ernest Addison said these developments would present an opportunity to transform the continent’s payment landscape in a way that would remove barriers for cheaper and more convenient cross-border transfers as well as reduced settlement times. While this is almost a consensus belief, the challenge has been to decide on the best approach to achieve such a feat.


The call is premised on the McKinsey & Co. report on The Future of Payments in Africa (2022), which revealed that Africa’s e-payments industry, across domestic and cross-border payments, generated approximately US$24 billion in revenues in 2020, of which about US$15 billion was domestic electronic payments.

Despite this, on average, only 5 to 7 per cent of all payment transactions in Africa were made via electronic or digital channels, compared with 50 per cent or more in Turkey, for instance.

This implies that e-payments have the potential of being a major growth pole for Africa, especially as the convenience and scalability of payment methods improve and the supportive infrastructure develops.

Indeed, mobile money interoperability remains a critical payment market infrastructure, which can boost cross-border payments on the continent.

Contextualising his call at the Africa Dialogue Series 2023 in Accra on Sunday, Dr Addison said: “Africa’s long-standing strategic objective has been regional integration and over the years various initiatives have been pursued by existing regional blocs to offer interoperable payment systems to facilitate trade.

However, market fragmentation persists with a range of non-tariff barriers that increase the cost of transaction and limit cross border trade.

Again, Africa’s cross border payment infrastructure has also not been as developed as the national payment infrastructure.

Indeed, most African countries have fairly developed domestic payment infrastructure such as Real Time Gross Settlement Systems, National Switches, Cheque Codeline transaction Systems, vibrant payment system with emerging and nascent financial technology firms as well as vibrant mobile money sector.

Interestingly these national payment systems are not fully linked to other national payment infrastructure to facilitate cross border payments and support regional trade.”

Work so far

The Governor further backed his call with some facts saying “indeed, intra-African trade for the period 2015-2019 averaged 15% for Africa, 58% for Asia and 68% for Europe. Several factors, including lack of payment infrastructure, has been identified as hampering growth of African trade”.

In view of that, he said to increase intra-African trade from 15% in 2019 to 50% by 2045, the African Union established the Africa Continental Free Trade Area (AfFCTA) in 2018.

“Broadly, AfCFTA seeks to create a single continental market for goods and services and provide combined annual output of almost US$2.5 trillion across member states of the African Union.

This arrangement is also expected to expand intra-African trade through a harmonised coordinated trade liberalisation and facilitation regimes across the existing Regional Economic Communities and the continent,” he said. 


To promote efficient intra-Africa trade through minimising the frictions in cross border payments, Afreximbank (Africa’s key trade finance institution) – in collaboration with other African central banks and the AfCFTA secretariat – established the Pan-African Payment and Settlement System (PAPSS) to enable efficient and secure financial transactions across African borders and to contribute to financial integration across the region.

The PAPSS initiative supports interoperable transactions including retail payments through partnerships between indirect participants such as electronic money issuers and direct participants such as commercial banks as well as cross-border payments of capital markets infrastructure.

This holds a great potential for scalability of mobile money interoperability across the continent and provides a platform that enables innovation in cross-border trade.

In spite of the acknowledgement of the benefits, Dr Addison still says the challenge, however, is that only a few of African countries have achieved full interoperability, which limits the ability to fully maximise the opportunity presented by the PAPSS platform in scaling mobile money interoperability.

“This brings up pertinent legacy challenges that need to be addressed in this direction, prominent among which are inadequate payment infrastructure and inconsistent compliance, status of the regulatory frameworks, policy coordination, user education and security and fraud concerns,” he said.

Consequently, he said scaling up mobile interoperability across African nations calls for review of legacy payment infrastructures, and better policy coordination among member countries.

He further stressed the need for effective public-private and joint international collaborations that leverage new technologies such as cloud-based infrastructure, distributed ledger technology (DLT) and regulatory sandbox initiatives.

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