Africa has long been touted as the birthplace of mobile money, and many point to its mass adoption as the main driver of financial inclusion. However, a recent report identifies specific obstacles in the Southern African Development Community (SADC) region.
Despite a wider adoption of mobile money compared to cards across the SADC, research has found that the former’s usage is far from universal as many merchants don’t accept electronic payments (e-payments). The report highlights the challenges to develop a reliable, resilient and fit-for-purpose payment infrastructure.
The report by Arkwright Consulting, entitled ‘SADC region industry report: progress and challenges in developing national payment infrastructure’, finds that 13 out of 16 SADC countries have a card penetration of less than 30%, despite the population being more banked than in other regions of Africa. And while 47% of the region’s population subscribes to mobile services, the adoption of e-payments in the retail segment remains low.
The researchers did a deep dive on five countries — Malawi, Mozambique, Namibia, Zambia, and Zimbabwe — where central banks have established mandates to use local infrastructure to provide basic processing services, such as authorisation and clearing for face-to-face transactions. However, these countries are lacking support for authentication services for e-commerce and processing for enhanced transactions, such as tokens.
According to the report, “This might represent a major roadblock for the deployment of e-commerce and innovative payment services in the domestic space.”
In addition, as most mandated local switches have restricted participation, the researchers believes that this might impede local fintech development and access to new payment solutions, limiting innovation and financial inclusion. Adoption remains low, especially around micro- and small merchants, which require innovative payment services, such as soft point-of-sale (POS) terminals, that are currently not supported by local switches.
For example, the share of e-payments in retail is around 10% in Malawi and Zambia, and up to 31% in Mozambique and Namibia.
The research also points to a lack of investment in the card acceptance infrastructure, as POS terminals are not contactless-enabled and most switches don’t support e-commerce transactions.
To drive financial inclusion, the report advises authorities and banking associations aiming to drive the development of an innovative payments services infrastructure and enable a local fintech ecosystem to make a realistic assessment of needed capabilities, of direct and indirect risks, and possible outcomes.
Joy Macknight is editor of The Banker. Follow her on X @joymacknight
Register to receive the Editor’s blog and in-depth coverage from the banking industry through our e-newsletters.
