Blockchain is the future of payments in Africa
The African Fintech market is gaining rapid traction. A recent EY report puts the growth of FinTech startups in Sub-Saharan Africa at 24% over the past 10 years.
Fintechs — companies that combine technology and innovative business models to enable, enhance, and disrupt traditional financial services — have grown their footprint considerably in Africa in the past few years. This is mainly because the continent has a less developed financial infrastructure and an unbanked population of 60%. By offering innovative and customer-friendly financial solutions to this population, Fintechs have the potential to revolutionize Africa’s financial infrastructure.
The opportunities for continued growth are promising — Africa has one of the highest mobile penetration levels in the world. The continent is also currently experiencing a boom in mobile financial services and payment solutions due to the high demand for financial inclusion in the region.
Kenya, South Africa, and Nigeria are the main hubs of the FinTech revolution in Africa. These areas boast relatively more robust FinTech ecosystems compared to the rest of Africa. They also drive innovation and shape the future of Fintech in Africa. Kenya, for instance, is currently the world leader in mobile money transactions, mainly due to the widespread use of MPesa across the country — about 45% of Kenya’s GDP is processed through MPesa.
Growth in payments
Today, startups in the payments and lending spaces are prevalent when it comes to the types of FinTech services being offered across the continent.
Why payments? The fundamental gaps in offering financial services that Fintechs can give revolve around payments. The rapid growth of the payments industry in Africa can be attributed to the government’s desire to boost financial inclusion and reduce the use of cash.
African nations have made huge strides in their attempts to meet that need for financial inclusion.
We’ve seen constant innovation and expansion of new technologies in the field of payments, from using low-cost mobile money for remittances to enabling digital payments and online banking services. It is no surprise then that Mark Zuckerberg visited Nairobi in September 2016 to learn about mobile money and payments in Africa.
Over the next ten years (and beyond), we’re seeing even faster changes in the payments industry, building on the accelerating growth in digital payments and the advent of new and disruptive technologies such as blockchain.
Besides, regulatory support and accelerating customer adoption of these new technologies spearhead some key developments in Africa’s payments industry. These include:
Social payments — payments through social media, e.g., Alipay, WeChat, etc.
NFC technology — contactless payments that use near-field communication (NFC) technology to exchange data between two devices — like your phone and a payment terminal. Examples are Apple Pay, Samsung Pay, and Android Pay eWallets.
Bluetooth low energy — making payments from any device anywhere in the store.
Blockchain technology — using distributed ledgers to facilitate fast, secure, low-cost payment processing services.
Payment is one area that blockchain can majorly transform in terms of cross-border payments, remittances, and micro-transactions. From large banks and enterprises optimizing global liquidity to retail stores accepting payment in digital currencies to new forms of customer identification for retail transactions, blockchain is permeating the payments landscape at an accelerated pace.
Decentralized Finance can drive Africa’s payment ecosystem
MPesa has made huge progress in simplifying domestic transactions. But when the payment has to cross border transactions, fees usually soar up to 31%. Thus it has become increasingly difficult to connect the entire population of Africa through mobile payment infrastructure.
DeFi can unify Africa’s fragmented payments ecosystem through a single secure platform that allows local merchants to accept payments instantly from anywhere in Africa. Customers can also seamlessly pay for goods and services from their digital wallets, irrespective of where they live in Africa.
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Vincent Olago is the founder of Crypt, a blogging service for crypto projects and businesses. With 6+ years in the crypto/web industry, he is a highly-sought after blockchain writer and strategist.
Shoot him a message at dr.plancksolago@gmail.com. (hey, what do you have to lose!)
