Africa, long reliant on cash transactions, is undergoing a transformative shift towards digital payments. According to insights shared by Joel Bronkowski, country lead for South Africa at Paystack, and supported by McKinsey data, cash still accounts for approximately 90% of payments across the continent.
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However, recent research reveals that digital payment adoption is surging, with 41% of Africans making digital payments in 2021 compared to just 27% in 2017. This shift is reshaping the economic landscape, offering a host of benefits to both individuals and businesses.
“The improved data and record-keeping that digital payments offer businesses, for example,” noted Bronkowski, “also makes it easier for them to access formal financing from banks and other institutional lenders. This improved access to capital leads to business expansion, job creation, and increased tax revenue, contributing to overall economic development.”
Bronkowski emphasised the significance of digital payments in promoting financial inclusion.
“Encouraging digital payments offers underserved populations access to formal banking and financial services, reducing income inequality and bolstering economic development. This, in turn, widens the tax base and contributes to overall prosperity,” he said.
Moreover, the data generated by digital payments provides valuable insights into economic trends and consumer behaviour.
According to Bronkowski, “Governments can harness this data for economic planning, policy formulation, and decision-making. Central banks can also leverage this information for informed decisions about monetary policy, interest rates, and inflation targeting, contributing to economic stability.”
Beyond indirect benefits, digital payments offer direct advantages to governments. “Accepting digital payments for services like taxes, fines, and fees streamlines financial processes, reducing administrative costs and improving efficiency in government operations,” explained Bronkowski. “It also enhances the delivery of public services, making them more accessible to citizens.”
“One of the most significant benefits,” he continued, “is the reduction of fraud and corruption through secure digital payment systems. This not only safeguards government finances but also enhances public trust.
“The growth of digital payments can drive investments in technology infrastructure, such as internet access and digital payment processing systems, which can have a positive ripple effect on the broader economy. Additionally, it facilitates international transactions, stimulating trade and further boosting the economy.”
To fully realise its potential, Bronkowski stressed that African countries must create the right conditions for their growth. This entails establishing regulatory environments that support secure digital payments, a trend increasingly seen in African governments.
“Collaboration between governments and the private sector is crucial in promoting digital payment adoption. This partnership can provide support, funding, and regulatory frameworks to encourage the growth of innovative fintech start-ups offering digital payment solutions,” Bronkowski highlighted.
“Initiatives like the South African Reserve Bank’s fintech unit and regulatory sandboxes have propelled the country’s fintech sector to global recognition, contributing significantly to the African economy.”
He added, “On a continental scale, the African Continental Free Trade Area (AfCFTA) has prompted nations to enhance cross-border digital payment infrastructure to facilitate intra-African trade. Harmonising payment systems and reducing cross-border transaction costs are top priorities. The Pan-African Payment and Settlement System (PAPSS), launched in 2022, exemplifies these efforts, simplifying instant, secure payments across borders and benefiting all participating nations.”
“While cash remains prevalent in Africa,” Bronkowski concluded, “the trajectory toward digital payments is clear and unstoppable. The benefits for individual countries and the continent as a whole are too substantial to ignore.
“Thus, both public and private stakeholders must actively promote and support the adoption of digital payments. As Africa continues to embrace digitalisation, it is poised for a brighter, more inclusive, and prosperous future.”