Open for business: Harmonising Africa’s Payments Landscape

Hampered by a highly fragmented and competitive payments ecosystem, many businesses are struggling to grasp the market in Africa. The emergence of fintech, however, promises to inject new energy into the sector – helping to piece together this landscape and provide a frictionless payments experience, according to Akshay Grover, Group CEO of digital payments company Cellulant

Over the past few years, Africa has developed a well-earned reputation for being at the heart of payments innovation. Yet businesses trying to get a foothold on the continent have to deal with a highly fragmented payments market. Notably, these business have to engage a large number of partners to process the different types of payments their customers use, as each individual and each country favours different solutions. Due to the complexity of these issues, multinationals are being driven away, resulting in a loss of opportunities – particularly for businesses operating across multiple African countries.

The ramification of this is that fintechs are stepping in to play an important role in bridging the gap between merchants and their consumers by providing simpler payments solutions, including aggregating multiple providers’ services via a single platform.

The fragmented landscape

One of Africa’s most popular forms of payment is mobile money, which is favoured over the card solutions that dominate Europe and the US. Approximately 57% of Africa’s population does not even have a traditional bank account, resulting in debit and credit card penetration being extremely low, sitting at around 3%.

Yet despite mobile money being widely used, the service is provided by a huge number of mobile network operators (MNOs), with each African country served by its own range of MNOs. As such, it is costly and time-consuming to receive payments from different countries with unique systems and payments providers to capture what would normally be an attractive market successfully.

Meanwhile, for banks, the minimal card penetration and the prevalence of mobile money mean that historically they have been side-lined from the payments ecosystem and are struggling to close the gap for those who are still unbanked.

How fintechs can address the bottlenecks

Arguably, the solution to this payments challenge for businesses is collaboration. Partnerships between banks and fintechs have the potential to make digital financial solutions more accessible to consumers across all of Africa, not only facilitating greater financial inclusion but also strengthening the synergy between businesses, banks and consumers.

For businesses, the main benefit of this collaboration is the direct access to fintechs’ services, including the streamlining of various payment methods. This is vital to piecing together the fragmented market, providing businesses with a single point of entry – a single platform and log-in credentials, as well as an aggregated data feed – for all their different payment methods.

At Cellulant, for instance, we provide locally relevant and alternative payment methods for global, regional and local merchants, partnering with banks to extend the reach of these services to as many customers as possible. The result is a single API payments platform that enables businesses to collect payments online and offline while allowing anyone to pay from their mobile money, local and international cards or directly from their bank.

This approach can help solve problems for all kinds of businesses across Africa. In Zambia, for instance, three telcos account for the majority of all mobile payment services, with a fairly even split of market share. To receive mobile money from all consumers in their target market, merchants, therefore, need to have three different phone contracts, one with each of the mobile money providers, to receive money into three different mobile wallets – an inconvenient and time-consuming process.

For this reason, disruptions occur at the point of sale (POS) and in the back office. At the POS, the salesperson needs to operate three phones, with distinct log-in details and user interfaces; meanwhile, back-office teams have to reconcile these payments from different providers, dealing with data trapped in different systems and different formats. In addition, these differences create similar issues when it comes to managing chargebacks, reversals and refunds or disputes.

This experience is likely to strain smaller providers, heaping on unnecessary costs, draining time and eating into business margins. On the other hand, multinational businesses suffer these same issues across multiple payment methods and countries – multiplying the administrative hassle many times over.

Collaboration is Key

Direct access to a fintech’s services, however, can improve the user experience for the cashier managing the transaction at the POS – enabling them to work with just one familiar platform – while back-offices become more streamlined and efficient in terms of reconciliation. The process is also more straightforward for consumers, enabling them to support their local businesses through their preferred payment method.

Africa is a captivating example when it comes to the collaboration between banks and fintechs. This exciting project will piece together the African payments landscape in new ways that will increasingly benefit businesses wishing to tap into this attractive market. Such a partnership will be vital if harmonising solutions are to reach critical mass, and fintechs are going full steam ahead to ensure new opportunities and economic prosperity for those that need it the most.