Only 5 to 7% of all payment transactions are made through digital channels, this is according to a 2022 report by McKinsey on the future of payments in Africa. Despite the booming fintech industry on the continent, business to consumers transactions is largely cash-based.
For instance, cash is used in 73% of all transactions with MSMEs in Nigeria. This is not unique to Nigeria; the same behaviour can be seen across Africa. Cash was the most popular payment option in online retail in Morocco, Egypt, and Kenya in 2021, accounting for 74%, 60%, and 40% of the total, respectively as reported by Statista.
Consumers prefer cash because of the irregularity and unpredictability of digital payment options; no one wants to be stuck in a store after a shopping trip or a night of fine dining when their cards or bank transfers fail.
In this interview, Omoniyi Kolade, founder and CEO of SeerBit talks about the African digital payment landscape and how Seerbit amongst other African fintech companies is driving digital payments on the continent.
In recent times, Africa has witnessed exponential growth in digital financial services, driven by increasing mobile penetration. However, more than half of Africans remain without formal bank accounts but most own mobile phones through which they access basic financial services. In its 2021 State of the Industry report, GSMA, reveals that the value of mobile money transactions passed the $1 trillion mark in 2021 with Africa accounting for nearly 70% of the total amount of transactions recorded.
What is the future of digital payments in Africa?
Currently, we are in a growing direction in Africa. There’s a rise in urbanisation and then the realisation of the power of globalisation—for every customer that moves to an urban environment or has access to the digital space, it creates more inclusion.
We still have low internet penetration in Africa at the moment and this is an important driver of digital payments. Also, the infrastructures are not available yet. However, we have a strong spending power that can outspend nations like India. Unfortunately, we do not have the synergy that is going to convert the spending power into businesses.
The rise in SMEs on the continent will accelerate digital payments penetration on the continent thereby creating the future of e-commerce on the continent.
How are African fintechs like Seerbit able to drive digital payment adoption?
For Seerbit, one of our goals is the ability to build for the future and also to ensure that no customer is disenfranchised at any point by ensuring the availability of digital payment options. We are trying to look at how easy it will be as regards interoperability of payment, at the scale of SMEs.
If acceptance is not well-built, some consumers will be disenfranchised—thereby making it difficult for financial inclusion and it will hinder the growth of digital payments.
We are positioning ourselves to create those interoperability models between customers and businesses. Hence, we want to see how a P2P model of payment between businesses and customers can be enabled without cash.
The company has its roots as far back as 2011, when Kolade founded Centric Gateway, a pan-African fintech company that provides customised payment solutions strictly to enterprise clients including UBA Bank, FMCB, Ecobank and Keystone Bank.
Currently, Seerbit enables payment with bank/card transfers, USSD and card transactions. We are at the forefront of building solutions that will help individuals to digitise their payment lifestyles. For instance, a cab driver benefits from our products when a fintech company leverages our infrastructure to create digital payment channels that allow this driver to accept payments from his passengers.
In driving digital payments adoption in Africa, what are the limitations?
Cash is an enemy of digital payments, and there is a limit to what cash can achieve especially because it requires in-person payments.
For a marketplace to have full digitisation, both the business and the customer need internet-powered tools. Thus, poor internet penetration is a challenge in enabling the full adoption of digital payments on the continent—Africa has the lowest internet penetration in the world—only 22% of the continent has access to the internet.
Another thing is regulatory paths, the ability to enable cheaper access to devices. What is the policy around bringing devices into the market? Most times, due to multiple taxations, the cost of the fintech devices is high thereby reducing the chances for accessibility.
If you take a step further, the business itself is a challenge! We do not have transparency in how our businesses are structured, we recently noticed that some businesses will not use certain digital payment tools because they want to avoid certain levels of transparency—like tax exemption.
The lack of flexibility to accept digital payment options by consumers and merchants is also a limitation to the adoption of this system on the continent.
Multi-licensing is another limitation faced in the digital payment ecosystem. If you are in eighteen African countries, you are required to obtain different licenses for local regulators in each of these countries—the process is usually tough. As much as licensing is important in regulating the payment industry so as to ensure trust, a pan-African licence will accelerate the growth of digital payment.
“One of our goals at Seerbit is the ability to build for the future, we are looking at creating ease and flexibility in transactions between merchants and consumers, through other areas like P2P models that can enable digital payments for these businesses.” — Omoniyi Kolade