By Kirsten Wortmann, Paymentology’s Regional Director for Africa
Digital transactions are now woven into the fabric of everyday life in Africa. This summer, the continent saw a 17% increase in fintech companies, reaching nearly 700, affirming Africa’s status as a burgeoning fintech hub.
This growth has led to a surge in deals and investments, fuelling job creation and economic expansion across the region. But the fintech story in Africa is only just beginning. As the sector continues to expand, African nations stand poised to harness the momentum, unlocking additional potential.
Here Kirsten Wortmann, Paymentology’s Regional Director for Africa, delves into the top ten trends expected to shape African payments in the year 2024.
Digital cards and mobile wallets will continue to soar
The pandemic turbocharged digital and contactless payments in Africa, as hygiene and social distancing concerns prompted swift adoption by merchants. This shift blurs the line between virtual and physical realms across Africa, with mobile-based digital payments extending even to physical goods and services.
In 2024, the region’s smartphone usage will sustain the growth of digital cards for contactless payments via mobile apps, driven by virtual card tokenization for effortless Tap-and-Go transactions at contactless point-of-sale terminals. Mobile wallet solutions from telco and fintech giants like MTN Momo and Orange Money (powered by Paymentology) are poised to revolutionise consumer behaviour, making mobile and wearable payments, including smartwatches, the preferred choice for both in-store and online purchases.
Cross-border payments will help fintechs to scale
A big avenue for fintech and mobile wallet providers lies in opening up cross-border transactions, ensuring their relevance and revenue diversification. Safaricom and Vodacom in Africa have excelled in this space by offering virtual cards for global online payments linked to MPesa wallets.
Looking to 2024, non-traditional financial institutions are expected to continue to enter the cross-border payment space with digital wallets integrated into super-apps and using new technologies like cryptocurrencies. This trend will also extend to the business-to-business (B2B) sector over the next 5-10 years, following Agoda’s OTA payment model’s pioneering success in B2B cross-border transactions.
Fintech Funding to boost economic growth in Africa
In recent years, Africa has witnessed a surge in fintech startups, attracting significant attention from global investors, particularly from the United States. While African fintech investment reached its peak in 2021, a global post-pandemic trend and investor selectivity led to a slowdown in 2022 and 2023, resulting in fewer concluded deals. Nonetheless, African fintech remains an appealing prospect for both global and regional investment firms.
Over the next few years, fintech growth and funding is poised to concentrate on eleven key African markets, with fintechs seeking card solutions in countries such as Cameroon, Côte d’Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda. These nations collectively account for 70 percent of Africa’s GDP and half of its population.
Partnerships hold the key for the future of fintech
Partnerships will remain a driving force in Africa’s digital payment landscape, addressing the continent’s diverse payment trends influenced by local preferences and regulatory factors. As a result, collaboration among stakeholders is pivotal. Traditional banks are partnering with fintechs to remain competitive, while fintechs are collaborating with banks holding regulatory approvals and card scheme licenses. Many of Paymentology’s clients in Africa are non-bank financial service providers who rely on partnerships with local banks for BIN sponsorship and assistance with central bank applications for launching card programs.
Forward-thinking banks will persist in forming alliances with these non-bank entrants, recognising the revenue potential in payment integration and meeting customers’ demands for convenience, payment variety, and enhanced financial system access, challenges that legacy banks often face.
Sustainability in Payments remains important
Consumer preferences are evolving to prioritise products and services with strong environmental, social, and governance (ESG) credentials, and investors are actively seeking environmentally and socially responsible investment opportunities. Fintech and payment providers are key in fostering this shift, raising awareness and promoting sustainable payment methods like contactless cards. Additionally, aspects of the payment process, such as mobile app KYC, account opening, and digital receipts, have lower environmental impacts.
We will continue to see financial and non-financial institutions adapting their business models to align with sustainability goals, aiming to attract and retain customers and cater to the growing expectations of global investors who increasingly demand ESG compliance from fintech firms.
B2B will gain increased focus
The B2B payment space is gaining attention as businesses grapple with outdated, inefficient expense management processes, resulting in limited control and spend traceability. This sector is relatively unexplored in terms of digital payment solutions. Fintech companies like Boya in Kenya and Xente in Uganda (both powered by Paymentology) are addressing this gap by offering business clients prepaid virtual cards for streamlined travel and expense management, providing detailed data for tracking, reporting, and reconciliation.
In 2024, the digitisation of B2B and supply chain payments will emerge as a leading trend for electronic payment solutions, with Paymentology leading the way in providing card solutions to clients in this arena.
Cloud services boost next generation payments
Electronic payments is now a tech-driven industry, with SaaS providers utilising APIs and next-gen technologies like cloud computing to offer global services. Digital and Neo-banks outpace traditional banks, thanks to cloud-native tech stacks that lower operational expenses and expedite product launches.
In the coming year, incumbent banks will confront a widening technology divide, prompting many global banks to seek modernisation by partnering with cloud-native SaaS providers like Paymentology.
Instant payments will be here to stay
Cash-reliant emerging markets in Africa are rapidly transitioning to instant payments. For example, in Nigeria, instant-payment capabilities are integrated into POS devices, reducing cash transactions from 95% in 2019 to 80% in 2022 and still decreasing. Additionally, South Africa has introduced PayShap, an inter-bank instant payment service gaining local traction. We anticipate the emergence of similar solutions in the coming year.
Regulation remains top priority
Central Banks are acknowledging the permanence of digital payments and mobile-based financial services and the pivotal role their payment system oversight role plays in ensuring data privacy, stability, and trust in new payment providers, fostering payment innovation. Many countries in Africa are adapting regulations to permit digital KYC processes with biometrics and facial recognition, licensing new PSPs, and approving innovative payment methods like QR codes and contactless payments.
Government and central bank support for cloud-based SaaS providers, such as Paymentology, expedites card processing expansion without the need for physical infrastructure. While some countries are taking steps to create an enabling environment for payment innovation through fintech sandboxes and regulatory updates, additional efforts are essential to fully unlock the fintech sector’s potential.
Super Apps continue to be the hero
In Africa, financial inclusion hinges on affordable and convenient mobile payments, where phones serve as the primary tool for daily tasks, including transport, payments, shopping, saving, and lending. Consequently, both established and emerging players are developing super-apps that consolidate various products and services.
To cater to users grappling with limited memory storage and broadband availability on low-cost smartphones, mobile apps that offer a unified interface for wide-ranging activities are increasingly favoured and will continue to come to market. Payment service providers introducing super-apps are striving to meet user demands by incorporating features such as BNPL, bill payments, and virtual cards for online transactions.
