Africa’s digital payment sector

by Alastair Tempest: CEO at Ecommerce Forum South Africa.
The pandemic and its associated lockdowns have highlighted the take-up of mobile banking services and other digital platforms, and sped up the adoption of digital banking technology and services by a couple of years.

Across the continent, it appears that traditional banks have lost out to mobile money providers in terms of payment fees because of greater reliance on ecommerce and also because of fears over infection via physical transactions.

A recent survey of Kenyan banks reveals the rapid uptake of all digital platforms, even in a country where there is already a very well developed mobile banking structure (for example, Safaricom’s M-Pesa had 20.5m users at the start of 2021). The trend was given a big boost by the decision of Kenyan banks and telecoms operators to lift mobile transaction charges during the course of the pandemic.

Taken as a whole, Sub-Saharan Africa is the second fastest-growing, and the second most profitable banking market in the world, partly because of the rapid adoption of new technology. Although most customers have yet to try banking apps, 80% of African banks now offer them and almost all the rest plan to roll them out in the near future. Here are some of the recent developments:

With no end of cash shortages in sight in Zimbabwe, the use of mobile money has become the order of the day.

Flutterwave is now a unicorn (a company with a valuation of over US$1 billion) less than 5 years after it launched, and has just entered into an agreement with PayPal which will further advance its attraction to SMEs wanting to see cross-frontier. Flutterwave provides modern payments technology and infrastructure for Africa to enable people and businesses to connect with the global economy. Its solutions assists banks and businesses to replace multiple payment integrations with one simple API, which enables processing of any form of payment anywhere in Africa. Flutterwave raised US$10 million in Series A funding in 2017, and in an extension round in 2018, and a US$35 million Series B in January 2020. It has now added to that funding with a record-breaking Series C round worth US$170 million, which takes the value of the company to over US$1 billion.

There is a growing convergence between mobile wallets and cards, as more card payment platforms seek to onboard mobile wallets. Last year, Kenya’s Safaricom partnered with the payment processing company Visa to enable the development of products that will support digital payments for customers of M-Pesa.

The $100 million investment from global payments giant Mastercard in the mobile money business arm of Airtel Africa values the subsidiary, Airtel Mobile Commerce, at $2.65 billion. It follows a recent $200 million investment in the company by TPG’s Rise Fund. Both TPG and Mastercard now have minority stakes in the company. Airtel Africa is a London-HQ-ed company operating in 14 African countries.

MTN has also gone into a collaboration with Mastercard to grow its Mobile Money (MoMo) offerings but there are also rumours that the teleco giant may be considering spinning off its financial services unit and potentially listing it to unlock value in its core business.

Meanwhile, another new Kenyan entrant, Tanda allows shop owners to access inventory on credit, and also become access points for essential services such as airtime, utility payments, banking and insurance services for their customers. The platform aggregates all major financial services providers, allowing agents to sell various digital products, while it also delivers essential goods to shops. It also extends unsecured credit to its agents. Tanda’s platform and network supports 58 banks and saccos, 4 telecoms, 18 billers, and 12,000 merchants and agents, and has served over 300,000 unique customers, all of which have processed millions of transactions to date. Tanda has now set its sights on growing its Kenyan footprint to 100,000 agents and merchants, and an expansion to Uganda and Rwanda within the next 24 months. Tanda has also secured key strategic partnerships with Mastercard and Interswitch which will further accelerate this growth.

Useful resources:
Ecommerce Forum South Africa
It is the goal of the EFSA to increase awareness, confidence and capability of the ecommerce industry in Africa.
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