APA-Addis Ababa (Ethiopia) – The Instant Payment Systems (IPS) landscape in Africa is not yet optimized to respond inclusively to end-user needs or to create sustainable, low-cost business models, according to a new AfricaNenda report launched in Addis Ababa on Wednesday, November 8.
By special correspondent Abdourahmane Diallo
The findings are stark. “We still have a long way to go to achieve digital transformation that leaves no one behind.” On Wednesday in the Ethiopian capital, AfricaNenda’s Deputy Managing Director, Sabine Mensah, pulled no punches in reminding us of the efforts needed to include the 400 million Africans still excluded from the continent’s financial systems.
Indeed, according to data from the second edition of the annual State of Inclusive Instant Payment Systems in Africa report, better known as the “SIIPS Report,” released on November 8, most operational IPSs have so far achieved only a basic level of inclusivity. This is because they offer minimal channel functionality and only support P2P and P2B transactions.
According to the report, only nine countries on the continent have access to advanced inclusive instant payment systems (IIPS). These are the three national systems in Ghana, Malawi and Zambia, and one regional system, GIMACPAY, in the Central African Economic and Monetary Community (CEMAC).
“Most IPSs still offer only a limited number of use cases, or do not currently provide access to users’ preferred channels. Only by supporting all retail-related use cases through an expanded set of channels and instruments, offered at minimal cost, will SPIs be able to promote retail flows, including personal remittances, government disbursements, and small business payments: all necessary elements for SPIs to grow and lay the foundation for a Digital Public Infrastructure (DPI),” the report’s authors explain.
Need for regulatory harmonisation
The SIIPS 2023 report shows that the number of SPIs on the continent has risen from 29 in 2022 to 32, following the launch of SPIs in Ethiopia, Morocco and South Africa. In the first six months of this year alone, these various systems processed 32 billion transactions valued at $1.2 trillion.
While impressive, these transaction volumes could be far exceeded if the various systems worked closely together. Of the 32, 29 are national systems and only three are regional. As a result, regulatory hurdles exist along the entire value chain of cross-border retail payments, the document notes.
The complexity of cross-border payments is not limited to the jurisdictions involved in sending and receiving funds. Players operating in multiple jurisdictions must comply with all the requirements of each country. A source of uncertainty is which laws, regulations and practices apply or prevail, particularly when laws between jurisdictions conflict. Hence the need to work towards harmonising regulations at both regional and continental levels.
“We need harmonised regulations and harmonized customer identification systems to facilitate cross-border transactions. Similarly, we need systems and processes that allow the innovation that we see developing in certain countries to migrate across the continent. For the potential of the African Continental Free Trade Area (ZLECAF) to be realized and for us to trade across borders, we need payment systems that allow us to pay anywhere, anytime, anywhere in Africa,” said Ms. Mensah.
This harmonization will require policy formulation at regional and national levels, alignment of regulatory frameworks with approaches that are reasonably compatible with countries’ respective technical and risk tolerances. In addition, the establishment of payment services directives and the conclusion of trade agreements are formal instruments for achieving longer-term harmonisation outcomes.
Several national and regional SPIs are under development. If they manage to get off the ground, the SPI landscape will be much more saturated. Seventeen countries on the continent are developing a national SPI, although only two of them can be considered new in the context of the SIIPS2022 report. These are the SPIs in Algeria and Tunisia, the document notes.
In addition, three regional SPIs are under development and have been established in the Common Market for Eastern and Southern Africa (COMESA), the United Nations Economic Commission for Africa (UNECA), and the West African Economic and Monetary Union (UEMOA).
COMESA’s SPI will serve 22 countries in southern and eastern Africa, facilitating intra-regional payments. “The African digital payments market has entered a new era. There are significant opportunities to drive digital payments and accelerate interoperability across the region. Several market, system and consumer trends will shape the evolution of the IPS landscape and its ability to gain traction across countries and regions,” the report concludes.