Banks and fintechs in Africa are innovating in collaboration to reduce friction in domestic and cross-border payments. They are delivering much-needed new solutions to consumers and businesses, leveraging Africa’s domestic e-payments market to grow by approximately 20 percent per year, reaching around $40 billion by 2025.
In Africa, the formal banking sector has historically faced challenges in reaching a significant portion of the population, resulting in a substantial number of unbanked individuals. While progress has been made, approximately 350 million adults in sub-Saharan Africa remain unbanked, constituting 17% of the global unbanked population, owing to limited income, perceived high costs, and inadequate access to financial infrastructure.
However, with the rapid growth of the mobile money market and digital payments, Africa is positioned to become the world's fastest-growing fintech region, anticipating a revenue increase of 13 times the global average of 6 times. While fintechs and banks have provided access to many African societies, the continent still faces challenges in its mission to drive financial inclusion.
Traditional banks grapple with high operating costs and legacy infrastructure complexities, hindering their digitization efforts. Fintechs face regulatory and compliance hurdles, coupled with trust-building issues, particularly among those less comfortable with technology.
The key to overcoming these challenges lies in collaboration between traditional banks and fintechs. While banks bring established customer bases, substantial balance sheets, trust, and regulatory expertise, fintechs contribute agility and innovation, aiding banks in modernizing infrastructure and addressing the needs of the unbanked.
Platforms like Onafriq are driven by a commitment to foster economic growth across the African continent. Onafriq connects more than 500 million mobile wallets, spanning over 1300 live payment corridors across 40 African countries. With affiliations to over 200 payment schemes, Onafriq is a "one-stop-shop" for entities seeking to collect or disburse funds, along with issuing and processing prepaid cards within Africa. The company has diligently undertaken the task of establishing connections with multiple schemes and networks, streamlining the process for its clients.
Cohesive ecosystems and omnichannel transactions: The implications of the collaboration
Similar to the diverse nature of the continent itself, Africa's payments environment exhibits high dynamism and diversity. Payment types vary significantly among individuals and countries, resulting in a fragmented and disconnected payment ecosystem. Presently, each merchant or company must individually integrate with different payment service providers to cater to a broad consumer base. The World Economic Forum highlights that varying technical standards, laws, and regulations spanning countries contribute to many digital payment methods functioning as closed loops, lacking interoperability.
However, enhanced collaboration within Africa's financial services sector holds the potential to alleviate this disconnect. By fostering stronger partnerships, the sector can create ecosystems that facilitate omnichannel transactions, payments, and financial services, seamlessly occurring across platforms and borders. This collaborative approach positions Africa's financial services sector to address challenges faced by individuals and businesses on the continent. It opens avenues for the development of innovative financial products and services tailored to Africa's unique needs, simultaneously reducing the cost of financial transactions and broadening access to financial services.
For instance, such collaboration enables individuals and businesses to digitally save money, facilitates access to microloans through financial data from fintech apps, and expands access to global markets for small and medium-sized enterprises. Ultimately, this collaborative effort ensures ongoing strides in driving innovation, creating an environment that guarantees the seamless delivery of financial services for everyone, and fostering economic growth across the continent.
With a driving passion to create a relatable content, Pallavi progressed from writing as a freelancer to full-time professional. Science, innovation, technology, economics are very few (but not limiting) fields she zealous about. Reading, writing, and teaching are the other activities she loves to get involved beyond content writing for intelligenthq.com, citiesabc.com, and openbusinesscouncil.org