E-Financial
Africa’s Payment Space Absorbs COVID – 19 Impact, Returns to Growth
Globally, as well as in Africa, the payments industry suffered a much-smaller-than-anticipated impact from the COVID-19 crisis and has returned to growth with renewed momentum, according to a new report, titled Global Payments 2021: All In for Growth, by Boston Consulting Group (BCG).
This 19th annual analysis by BCG of the global payments industry reports that the sector responded quickly to challenges posed by the pandemic, from e-commerce adoption to accelerating cash-to-noncash conversion.
Global payments revenues declined by only 2.5% from 2019 to 2020, to US$1.5-trillion, and they could reach US$2.9-trillion by 2030.
BCG’s five-year outlook suggests that global payments revenues will expand by a healthy 7.3% from 2020 to 2025. All regions are likely to see strong growth over the next five years, with the Middle East and Africa expected to enjoy a compound annual growth rate (CAGR) of 6.9% from 2020 to 2025. This follows closely behind the global leader, Asia-Pacific, which is expected to have a CAGR of 8.8%.
“This growth forecast makes the Middle East and Africa one of the world’s strongest frontiers for payments. This is a huge region, however, with very different market characteristics from one sub-region to another – and despite challenges around less developed banking infrastructure in Sub-Saharan Africa as a whole, we believe that Africa is poised to see significant payments growth,” says Tijsbert Creemers, Managing Director and Partner at Boston Consulting Group, and co-author of the report.
In Africa, this growth has been and will continue to be augmented by high mobile penetration driving digital ecosystems and platform solutions.
Like payments front-runners China and India, the continent’s explosive digital payments evolution will be driven by local dynamics that include strong consumer interest in using mobile money and low card and banking penetration, BCG states.
The business strategy and tech solutions consultancy says South Africa is a mature market in terms of payments infrastructure. Most major banks in the country have enabled digital wallets such as Apple Pay and Samsung Pay, and the country’s retail real-time payments system is expected to launch in 2022.
In countries like Kenya, Ghana, Uganda, and Côte d’Ivoire, mobile wallets and money have already largely displaced cash – which is costly and dangerous to carry – and opened access to financial services products, driving financial inclusion in a region where this has traditionally been a challenge.
“With the right strategies in place and ongoing investment in creating a rich customer experience that meets customer needs, mobile payments players in Africa should continue to see strong growth in this highly competitive space,” says Creemers.
These opportunities extend to ecosystems, which have expanded rapidly in the past few years, too, with payments players capturing as much as two-thirds of the region’s Fintech funding in 2019.
Both banks and Fintechs across Africa have consistently continued to innovate to address challenges in critical sectors such as agriculture, education, and healthcare, as well as in driving financial inclusion across the continent – and, in line with global trends, after years of strong growth, Fintechs are entering a stage of more mature development.
“There is plenty of movement in this high-value area, in terms of innovation and in terms of industry consolidation and M&A, as banks increasingly acquire Fintechs and start-ups to achieve greater scale and improve risk modelling capabilities to accommodate growth in payments and finance products,” says Creemers.
Banks and networks across the continent have shown they are not standing idle in the face of rapid innovation and competition from mobile network operators and Fintechs – they are re-engaging in payments as a strategic play to acquire data and create rich interactions with customers.
In addition to deal-making through M&A, consolidation and merchant acquiring, they are modernising their payments technology and leveraging their geographical footprint to introduce innovative payments services.
They are also increasingly using insights from payment data and transactional behaviour to provide a rich customer experience and to add value by offering personalised services and solutions that are built around customer behaviour.
These advances are accompanied by emerging trends around faster adoption of digital currency activity, and focusing on regulations around payments.
“Globally, the intensity around digital currencies is growing, and although it isn’t a major trend in South Africa or the rest of Africa yet, it is going to require scale in the next five to 10 years when it becomes more mainstream, and banks will need to have a digital currency strategy incorporating risk mitigation in place,” says Creemers.
Likewise, banks and payments players will need to focus on evolving regulations, and finding the balance between speeding up payments innovation by removing unnecessary red tape and maintaining the integrity of payments through sound regulatory frameworks.
“As it stands, the payments ecosystem is thriving in South Africa and across Africa, and the opportunity to increase adoption of digital payments across the continent could allow Africa to leapfrog more mature markets, where cards remain the primary instrument for some time.
“This will require a clear strategy around where to invest to capture future valuables that deliver innovation, growth, customer value and financial inclusion,” says Creemers.
Central Bank of Nigeria (CBN) has awarded the country’s second Payment Terminal Service Aggregator (PTSA) license to Unified Payments, Nigeria’s premier financial technology company, following a rigorous and transparent process,
The move is targeted at enforcing existing requirement that all transactions from point-of-sale channels in Nigeria must go through a licensed Payment Terminal Service Aggregator (PTSA).
The CBN is enforcing the laws to clamp down on financial crimes and other market misconducts and it aligns with the CBN’s objectives to fully track all electronic transactions in Nigeria, given the propensity of using such transactions to fund insecurity, violent crimes, banditry, kidnapping as well as other vices.
According to one analyst, “By awarding a second PTSA license, the apex bank has proactively responded to industry operators who had expressed serious concerns about channelling all transactions through a single aggregator, the Nigeria Interbank Settlement System PLC (NIBBS), as has been the case for some years.
“With the new policy direction, payments service providers would henceforth route all transactions through either of the two licensed Companies.”
Other financial analysts and industry players have commended the Central Bank, affirming that “the move can be a massive step in the right direction. They also commended the open, transparent, and inclusive manner via which the selection process was managed, and the license awarded.
“The selection process, which lasted for months, began with an invitation for qualified organisations within the payment industry to submit an Expression of Interest document, alongside other requisite documentation and additional capital requirement of N1 billion.”
The new management of CBN decided not to give the license out without going through an open process – and for the first time in licensing a payment service provider – the apex bank went through a public bid process outlined in its publication of Friday, January 5, 2024, in different national newspapers. At the end of the process, Unified Payments emerged as the most preferred service provider.
Unified Payment Services Limited, also called Unified Payments or UP, is a shared service provider within Nigeria’s financial technology sector owned by a consortium of Nigerian banks. For over 26 years, the firm has provided payment technology to banks and other industry operators. The first and only non-bank entity that is a principal member and licensed acquirer of all of American Express, Mastercard, Visa, UnionPay and Payattitude. Unified Payments facilitates both local and international transactions.
Formerly known as ValuCard Nigeria Plc, Unified Payments led the way to introduce POS payments in Nigeria under its card scheme known as ValuCard which is the first payment card to be issued in Nigeria. The company later transformed into a scheme-neutral and option-neutral service provider enabling transactions under different schemes.
The company has continued to provide leading payment technologies and services, enabling different operators to leverage its capabilities and licenses, enabling prompt and seamless transactions.
Among the shareholders of Unified Payments are First Bank, Access Bank, United Bank for Africa (UBA), Guaranty Trust Bank Plc, Zenith Bank and Fidelity Bank. Other shareholders are Citibank Nigeria Limited, Ecobank of Nigeria Plc, First City Monument Bank Plc, Keystone Bank Ltd, Polaris Bank Ltd, Stanbic IBTC Bank Plc, Sterling Bank Plc and Wema Bank Plc.
Chartered Institute of Bankers of Nigeria, CIBN, has expressed support for the ongoing banking recapitalization exercise saying it will empower banks to lend more to the economy.
CIBN President, Dr. Ken Opara stated this yesterday while speaking at the annual lecture of the institute in Lagos, with the theme “Improving Availability of Credit in the Nigerian Real Economy: The Critical Importance of Liquidity.”
Okpara noted that the volume of credit to the real sector activities namely agriculture, manufacturing and services is low compared to their critical role in driving economic growth.
Consequently, he called for more credit to the real sector, saying, “I propose that we consider offering more credit to these key sectors and particularly the agriculture sector. It is for this reason that the Recapitalization exercise is a welcome development.
“The recently announced upward review of the Minimum Capital Requirements of Nigeria by the Central Bank of Nigeria would further empower banks to extend more credit to the economy’s productive sectors.”
To address these factors impeding credit to the real sector, Okpara suggested that, “The government needs to improve further the ease of doing business and infrastructural development, such as power, roads, rail networks, etc.
“Setting up industrial centres where these companies can co-habit and share common infrastructure. Harmonize and reduce the various taxes and levies, including locating them in a single hub.
“Banks need to be deliberate in de-risking these companies via Capacity building programmes, and Advisory services.
Specialised Financial Institutions can be created in addition to the Bank of Industry (BOI), especially credit guarantee agencies and risk-sharing institutions, to further facilitate the deepening of credit as practiced in countries such as China which significantly transformed its economy.
A new report claims that 20 per cent of Nigerians are using Bitcoin to carry out financial transactions every day.
According to the open-source blockchain website, Elastos, the research was compiled from online interviews conducted with 1,407 self-defined ‘tech savvy’ respondents in Brazil, Germany, Nigeria, South Korea, UAE, the UK, and the US.
The interviews were completed by a third party, a registered market research company and completed between 30 March and 04 April ’24.
The report further revealed that 67 per cent of Nigerians would have more trust in Bitcoin to put their life savings than banks and local governments.
The report reads; “The inaugural BIT Index (Bitcoin; Innovation & Trust) – compiled from over 1,400 self-defined ‘tech savvy’ respondents from 7 countries across the globe – sheds light on the actual perception and use of Bitcoin in people’s daily lives, irrespective of its current valuation. Elastos’ BIT Index is part of ongoing research to better track the ‘real world’ use of Bitcoin together with users’ motivations, expectations and barriers around the same.
“In particular, the data reveals the role being played by emerging markets in terms of understanding, usage and confidence around Bitcoin. Nigerian respondents’ levels of usage and trust compare starkly with those expressed from so-called ‘established’ markets such as Germany and the UK and Germany where daily usage levels are just 8% (for German respondents) and (9% for their UK counterparts).
“In terms of the trust – in addition to Nigeria – significant proportions of respondents from Brazil (35 per cent) and the UAE (32 per cent) would have more confidence in Bitcoin-based services to protect their life savings compared to those from markets such as the UK (20 per cent) and Germany (22 per cent).
“When it comes to ensuring the integrity of online transactions, emerging market respondents also revealed their relative confidence in Bitcoin, compared to alternatives. According to the data, 66 per cent of Nigerian respondents and 35 per cent from Brazil have more confidence in Bitcoin-based systems than alternatives such as banks, or national Governments, compared to figures of just 16 per cent (Germany) and 21 per cent (UK) who feel the same.
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