The Covid-19 Pandemic has exposed the Achille’s heel, as well as a ripe opportunity, in sub-
Saharan Africa’s trade and payments landscape. Chipo Mushwana, Executive of
Emerging Payments at Nedbank explores the challenges and solutions to support the
continent’s consumer and business population in economic recovery.
Various studies place the rate of financial inclusion in sub-Saharan Africa at between 20%,
to as high as 40% or more, of adults on the continent who don’t have access to formal
The bulk of people in Africa only engage with financial services through a mobile device, and
cash remains the primary means of transacting. In South Africa, for instance, 9 out of ten
payments made today are in cash, and they are for less than R1500. In Nigeria, 95% of
transactions are cash based and 60% of adults are without bank accounts, according to a
report by EY.
This has always been a conundrum for merchants seeking growth on the continent, an issue
becoming even more urgent during the Covid-19 pandemic, as the demand for digital
contactless payment systems intensified around the world.
At the centre of the digital payments ecosystem, are real-time gross settlement (RTGS)
systems that financial institutions rely on to process payments between each other. The
challenge in sub-Sharan Africa has been in linking the RTGS system with the overwhelming
With an estimated half a billion people out of a population of 1.2 billion accessing the
internet, as well as a growing middle class, there lies an opportunity to migrate these cash
payments to digital, supporting more secure and convenient payment methods.
As merchants and retailers seek to steer consumers from physical cash, due to both health
and security concerns, contactless payment or near-field communication (NFC) is one of the
solutions expected to grow rapidly in the medium term.
NFC systems allow customers to simply wave their smartphone across a reader to initiate a
transaction, which is faster and more convenient than inserting a card.
Contactless payment is also faster and more secure than PIN-based technology, as it
transfers the encrypted data to the point-of-sale device instantaneously. Its growing
relevance is evident in the fact that companies such as Google, Samsung, and Apple have
already developed their own contactless payment systems.
The challenge to greater adoption of NFC in Africa, however, has been technical complexity,
particularly in the capturing of credentials. Should a practical, secure solution for micro
retailers and subsistence traders emerge, it will lead to greater adoption of this technology.
Concurrently, there is a growing demand for mobile point of sale (mPOS)
technology, which has revolutionised the point of sale space by freeing
merchants from their bricks-and-mortar limitations.
Through app development and advancements in NFC technology and QR
codes, smartphones now have the capability to become mPOS devices, which has taken
away the need to purchase conventional devices to transact.
A recent report by JP Morgan predicts that there will be about 27.7 million mPOS devices
operational by the year 2021 globally, compared to 3.2 million in 2014.
Still, very few digital channels and instruments integrate well with the cash economy in
Africa, including NFC and mPOS.
An example of one that does, is the e-money instrument which is normally facilitated through
the agent channel, a pathway that interacts with the cash economy as many of these
consumers cash out through these agents.
As such, mobile wallets have proven to be an increasingly popular payment method in
recent years, most notably in places like Kenya and Nigeria, where internet penetration and
coverage is growing rapidly. Kenya’s mobile money market, for instance, has a 100%
penetration rate due to many customers holding multiple SIM cards.
Mobile wallets mimic a physical wallet, and enable consumers to send and receive money,
as well as to store money without having to apply for a formal bank account.
According to GSMA’s State of the Industry Report on Mobile Money 2019, sub-Saharan
Africa has 469 million registered mobile money accounts, accounting for nearly half of the
1.04 billion mobile money accounts registered globally.
This is increased steadily in 2020, as mobile wallets allow for the payment of utilities, buying
of everyday consumer goods and the ability to link to rewards programmes, even in the most
The constant need for improved security protocols on these platforms will also accelerate the
use of biometric authentication, including fingerprint scanners, facial recognition, iris
recognition, heartbeat analysis, and vein mapping.
In the coming years, banking and payment innovations will see tremendous change that will
benefit both merchants and consumers in sub-Saharan Africa, as financial services
institutions seek partnerships with fintech businesses that are trusted by consumers.
The ever-changing needs on both ends, coupled with security and health concerns, will
determine which solutions stay and which will be left by the wayside, resulting in a financial
services sector radically different to what the traditional bank looks like today.
Watch Chipo Mushwana presentation at the Future of Payments Focus Day 2021 HERE