As our lives continue to be more connected and mobile, the disruption of cash as a payment instrument and the rise in mobile money uptake especially in Sub-Saharan Africa is redefining the world’s understanding of mobile payments as a sub-set of digital payments. Within the Financial Technology (Fintech) ecosystem, the uptake and reach of digital payments has been fast and at a far larger scale globally in comparison to crypto-currency as these technologies continue to disrupt the design and delivery of financial services.
The global digital payments market is expected to grow at an average annual growth rate of 18% between 2018–23, with a turnover expected to reach $ 87 billion by 2023 according to ReportLinker.
Despite the continent hewing its zenith as a global leader in mobile payments, fragmentation of digital payment methods continues to be the biggest challenge yet and one that we simply can’t leapfrog. Africa lacks its own universal currency. Unlike the Euro or the US Dollar whose acceptance is at a global scale, the African continent still grapples with the movement and exchange of money from one country to another. This lack of a universal payment instrument that can be used across borders whether cash-based or virtual continues to hinder the continent’s aspirations for a digital economy.
At Cellulant, we are building a single payments platform for Africa that is bringing interoperability around digital payments to grow intra-Africa trade, remittances and online commerce. We hope that this article brings some clarity on what digital payments are, the benefits and why there is a need to transform Africa into a cashless society.
Defining Digital Payments
This is an electronic payment system where one pays for goods or services electronically instead of using cash or cheques. All payment methods are called instruments i.e. Cash, cheque, debit card, credit card, mobile money etc. Unlike cash where there is a physical legal tender that is exchanged, in digital payments, an electronic mode is used to send and receive money from the payer to the payee.
Benefits of digital payments
Time efficiency & ease of use
Unlike cash payments or bank or cheque deposits which require that you move from one location to another, either to a bank branch, or that utility service provider to pay your bills (water, electricity, PayTV etc) during their designated working hours, digital payments give you the ease to from wherever you are at whatever time you are free either through your mobile phone or Personal Computer (PC) saving you the time and hassle.
Accessibility & Convenience
Since time immemorial, innovations around money have always followed the advancements in trade and commerce. The nature of commerce today and the future trajectory is moving more towards online commerce.
Unlike the alternatives that require one to either visit the bank or an ATM to withdraw, digital payments are easily accessible and convenient via one’s mobile phone. In Africa, agency banking and the rollout of mobile money agents such as Cellulant’s Tingg as the last mile in delivery of financial services has made it more accessible and convenient for the rural majority who are locked out of formal banking.
Safety and Security
Despite increased cases of online and digital fraud. Digital payments are much safer and secure than alternatives. This is perhaps one of the biggest benefits of digital payments in the African context due to the high crime rate in urban areas especially in countries such as South Africa which ranks 4th in the world’s crime index.
Digital payment methods such as cards or mobile money have safety and security features embedded in them such as a PIN or password or a PCI number for user authentication in order to prevent fraud or unauthorized usage.
Although the transaction fees for digital payments determined by the bank (for mobile/digital banking) and/or by your mobile money operator (for mobile money/payments), the overall cost is often cheaper than paying by cash/cheque/bank deposit.
However, it’s important to note that in some countries, the transaction fees for most digital payments tend to be subsidized in order to encourage their usage (e.g zero fees on the use of Visa debit cards) and to deter the carrying of bulk cash which is often a security risk.
Payment history through digital records
Unlike alternatives such as cash where it’s hard to ‘follow the money’, digital payment methods always leave a trail which can be traced in the digital transaction records. This payment history ensures transparency which enhances trust between the payer and payee in any type of transaction.
Mobile, app-based banking has made more inroads in financial inclusion in the past 10 years than the 50 years of bank branches and plastic cards that preceded it.
Andrew Torre, Group Country Manager, Visa sub-Saharan Africa,
With a mobile phone, one can now open a mobile money or mobile wallet account which enables then send/receive money, deposit, check balance, save, and even borrow without the need to have a bank account.
Financial Technology companies such as Cellulant and mobile money operators continue to play a significant role in providing financial services to the rural majority who have previously been excluded from the formal financial system.
Cellulant, the leader in digital payments in Africa
Cellulant is Africa’s leading financial technology company that provides a single digital payments platform which runs an ecosystem of consumers, retailers, merchants, banks, mobile network operators, Governments and International Development Partners. Today, Cellulant’s payments platform hosts 120 of the largest banks in Africa, 40 mobile money operators, 600 local and international merchants; and is connected to 700M consumers across 34 countries.
We are your gateway to understanding and using digital payments in Africa. Talk to us today on how we can help you send or receive digital payments anywhere in the continent.