By Corrie Bakker, Head of Business Development & Strategy for PayU in Africa
Sub-Saharan Africa is a region of unimaginable potential for fintech innovation.
According to 2015 figures from the World Bank, Sub-Saharan Africa is home to 350 million unbanked individuals, 17% of the global total. That’s a huge untapped market.
The region’s underdeveloped financial infrastructure and largely unbanked population presents fintechs with the opportunity to provide unrivalled access to financial services. We’re already seeing this take effect in the form of mobile payment companies. With one of the highest mobile phone penetration levels in the world, Africa is currently experiencing a boom in mobile money and payment technologies.
Africa’s mobile money shift
Particularly in Sub-Saharan Africa, mobile payment companies have been filling the gap left by banks. PayU’s global Financial Prosperity Barometer found that Africa (50%) is the only region that uses mobile money more than traditional banks for credit compared to a global total of 16%. Indeed, Sub-Saharan Africa is the only region in the world where close to 10% of GDP in transactions occur through mobile money. This compares with just 7% of GDP in Asia and less than 2% of GDP in other regions. (World Economic Forum). By tailoring the offering to the specific country in which they operate, mobile services are experiencing huge success in providing more people than ever with access to basic financial services.
Yet, the region has historically intimidated international investors, even though the opportunities and available insights are ever more apparent. Businesses are, and should be, paying more attention. PayU’s global Financial Prosperity Barometer found that smartphone apps are the most popular way to use a financial service in Africa. Indeed, the region is currently responsible for an astonishing 45.6% of mobile money activity in the world (GSMA).
Africa’s e-commerce opportunity
Eyes are also turning to the continent’s “biggest business opportunity”, according to Jack Ma: e-commerce. There are currently around 65.4 million e-commerce users in Africa, a number set to rise by another 20 million over the next two years. In part, the incredible rise of smartphones and mobile wallets is facilitating this growth in e-commerce.
The African e-commerce market has already been successfully harnessed by e-commerce entrepreneurs and mobile solutions such as Jumia, Mall For Africa, PayU and M-Pesa. You only need to look at how many days M-Pesa took to reach its first one million active users- a mere 239 – to see how receptive the market is.
Increasing internet penetration is driving the growth of e-commerce across the continent in conjunction with improved economic conditions, streamlined consumer experience and a growing middle-class population. However, there is another factor propelling e-commerce coming in the form of improved cross-border trade.
It remains the case that over 80% of Africa’s exports go outside the continent (as opposed to intra-African exports); an incredibly high proportion compared to most other parts of the world (Brookings). Initiatives, such as the African Continental Free Trade Agreement, highlight the continent’s appetite for cross-border trade and demonstrate the work being done to modernise both regulation and processes. This agreement, pioneered by the African Union and signed by 54 members of the state, requires members to remove tariffs from 90% of goods, allowing free access to commodities, goods, and services across the continent.
Arrangements like this are a crucial step in overcoming many of the continent’s hurdles, from legacy systems with a lack of transparency and complex regulations and legalities to system inefficiencies and limited access to reliable and recognisable payment options.
Streamlining cross-border payment systems even further is critical to enabling the huge growth of cross-border trade and e-commerce activity that is possible. Opening up African countries to more trade is vital to bringing on board the predicted 20 million e-commerce users Statista research shows will be active by 2022 year.
Kenya leads the way
Kenya has oft been touted as the leading country when it comes to mobile money and e-commerce. As such, Kenya represents massive potential for e-commerce. This is driven by a number of things, not least the country’s young population – one in four of the population is under the age of 35. In addition, Kenya’s internet accessibility is the highest in the whole of Sub-Saharan Africa, with internet penetration up at 89.4%. As you might then expect, Kenya’s rate of financial inclusion is now 83%, up from just 27% in 2006. And there’s no doubt that investors and entrepreneurs are taking notice – e.g. Copia, the e-commerce platform serving unbanked customers in rural Kenya, recently raised $26 million. Kenya’s fintech hub is located in Nairobi and home to more than 50 fintechs, most of which are looking to dominate the payments landscape.
And it’s not just investors taking notice. Kenya’s government has even decided to introduce a new tax on digital markets to bring digital platforms under its VAT and income taxes. Though somewhat controversial, this move indicates the extraordinary growth potential recognised by investors and regulators alike.
A recent study from McKinsey predicting electronic-payments revenue in Sub-Saharan Africa could reach up to $16 billion annually in the next few years if the growth of mobile payments in Kenya is repeated across the continent. This will bring with it even more growth in e-commerce, as both consumers and merchants take advantage of the new technology at their fingertips
This is only the beginning
According to the World Economic Forum, the continent’s growth is projected to increase to 4% in 2020; higher than other emerging and developing regions. It’s clear that this is in part facilitated by the global rise in mobile payment capabilities, in turn fueling the demand for e-commerce across Africa’s once obstacle-filled borders.
The digitalisation of payments in Sub-Saharan Africa is aiding the increase in cross-border activity and opening up opportunities for merchants to reach audiences who were previously inaccessible. By the end of 2018, there were 395.7 million registered mobile money accounts in Sub-Saharan Africa, representing nearly half of total global mobile money accounts (GSMA). To capture this vast audience, payment solutions providers should look to provide both businesses and consumers with reliable, secure and trusted payment infrastructure, whether domestically or across borders.
Africa’s population has proven that it is hungry for digital innovation. The region has the potential to embrace the eBays and Amazons of the world and is increasingly creating its own, as international investment is made easier and more appealing.
Using payments to streamline everyday transport
By Venceslas Cartier, Global Head of Transportation & Smart Mobility at Ingenico Enterprise Retail
Once upon a time the only way to get from A to B on public transport was with cash – and likely a pre-paid ticket bought from a physical office. Nowadays, thanks to technological developments, options range from contactless and mobile payments, to in-app tickets and more. As payment methods advance, consumers and merchants are naturally moving towards Mobility as a Service (MaaS) systems, integrating various forms of transport services into a single mobility service, accessible on demand.
This move towards MaaS does not only streamline the consumer experience, it has other positive impacts too. Incentivising public transport use reduces environmental pollution, improves mental wellbeing by reducing travel-related stress, and aids productivity by freeing up time otherwise spent driving. With this in mind, let’s take a look at the current trends affecting the transport sector, as well as how payments can optimise transportation for both operators and consumers alike.
Optimising transport with payments
The payment process is integral to any service. A payment service provider (PSP) can provide a range of key benefits to operators by proving a gateway to the transportation open payment ecosystem, and ensuring they meet objectives in 3 key areas.
- Environmentally, by reducing the use of personal cars and alleviating pollution and congestion.
- Societally, making urban mobility more inclusive in terms of improving access to all areas and for all socioeconomic classes.
- Economically, by optimising investment in eco-structure and fostering financial transactions, therefore improving the wealth of the city.
Payments professionals’ expertise and technological solutions can make payments easy again for transport operators. They can provide a range of options so that the customer can choose which one is right for them, leveraging the capabilities of the mobility services’ infrastructure (contactless, mobile wallets, P2P, closed-loop, QR code, and blockchain).
Furthermore, they can help promote inclusion and sustainable urban development. For example, methods such as prepaid virtual cards, or mobility accounts linked to a prepaid account can reduce the risks of excluding the unbanked. The environmental impact per kilometre can also be reduced, along with the use of vehicles with lower emissions per person per kilometre.
Finally, PSPs can put merchants’ minds at ease, providing payment liability, allowing aggregation of all due amounts from all mobility service providers, and collecting payments in one single transaction from users while dispatching revenue between mobility service providers.
COVID-19’s disruption to the travel industry cannot be overlooked. In fact, research suggests that public transit ridership is down 70% across the globe since the onset of the virus, longer distance travel has seen reductions of up to 90%, and payment by cash has seen a 60% drop.
Being realistic, these behavioural shifts are unlikely to revert anytime soon, so it’s important for merchants to keep this in mind when thinking about payment methods. More than 70% of consumers and travellers say they are likely to avoid the use of cash over the next six months. As a result, more than 40 countries have already raised their contactless payment threshold, further helping consumers to avoid contact with frequently touched pin pads.
However, the pandemic has only accelerated the way things were heading already and highlighted the benefits. Within the context of the pandemic, transportation needs to reinvent itself and adapt its processes to suit the shift in commuter habits that we’ve already seen and will continue to see in the future.
Other trends to keep an eye on
Contactless has been steadily growing on the transport scene, as have mobile payments and in-app purchases. In fact, the recent move to mobile and online ticketing is the most promising method so far, having seen significant growth in the last few years and having been accelerated by COVID-19 as discussed above. Once consumers move to these easy, convenient, and seamless methods, it’s rare that they revert – so it’s a good idea for operators to think how they can cater to these preferences.
Speed and convenience are a must for busy travellers – but not at the expense of data security. Finding the right payments partner is therefore crucial so operators can safeguard their customers’ personal data, while also keeping on top of other security regulations/features such as P2P encryption, PCI certification, and tokenisation.
Next steps for operators
Public transport is essential for many peoples’ everyday lives – COVID-19 or no COVID-19. As such, mobility service providers can make a great difference to their service and operations by implementing the right solutions.
Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime
By Dhanum Nursigadoo, ComplyAdvantage
With the summer drawing to a close, many countries who rely significantly on warm weather tourism will be assessing the impact of Covid-19. Being a small island in the middle of the Mediterranean you would expect Malta to be taking a significant economical hit – just like we are seeing in other popular European holiday destinations – but this doesn’t take into account the strength of the Maltese economy.
Emerging from the eurozone crisis with one of the most dynamic economies strategically positioned between three continents, Malta has had one of the lowest unemployment rates in the EU and has recently seen its GDP growth expand year-on-year. But perhaps the most important aspect of the Maltese economy has been its attraction for foreign businesses with only a 5% tax on profits. It is no secret that Malta is a tax haven, probably one of the most effective tax havens in the world.
But you can’t pick and choose who takes shelter, and it’s no secret that money launderers have been taking advantage of the regulatory landscape in this archipelago.
The conditions of a tax haven suit criminal enterprises, who can take advantage of the opaque environment and blend their illegal activities with the same operations enjoyed by high net worth individuals and corporations who are looking to reduce their tax bill. And last year Malta’s keenness for secrecy and avoidance resulted in a damning report by Moneyval – the Council of Europe’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) body – which found that while the nation had made some efforts to curb money laundering there was still much to be desired in order to bring the tax haven up to standard. Overall, they were of the opinion that Malta viewed combating money laundering as a non-priority and this resulted in branding Malta with low to partial ratings for 30 out of the 40 Financial Action Task Force (FATF) recommendations.
The findings of the report were stated to have the potential to “create within the wider public the perception that there may exist a culture of inactivity or impunity”. This follows on from a series of international high-profile stories regarding Malta and financial crime. Most shocking was the murder of journalist Daphne Caruana Galizia – who investigated corruption and money laundering in her native country – and was killed by a car-bomb three years ago leading to international outrage and condemnation.
Now Malta is in a race against time to turn their reputation around or they will suffer genuine consequences. The FATF have threatened to place Malta on a “greylist” of high-risk jurisdictions unless they have shown a genuine commitment to combatting financial crime and implemented the recommendations of the Moneyval report. If they fail, this would make Malta the first EU country to make the list and join others such as Panama, Syria and Zimbabwe.
The pandemic has actually given Malta more time to meet these obligations, and it has been widely reported that an initial summer deadline has now been moved to October due to the widespread disruption.
As we head into the autumn, there are signs that Malta has begun to take action. The Malta Financial Services Authority (MFSA) has created and established an empowered AML now headed up by Anthony Eddington, formerly of the UK’s Financial Conduct Authority and who has previous experience of tackling anti-financial crime at Deutsche Bank. This team has already begun working closely with international experts, specifically partners in the US through the US embassy in Malta and the United States Commodities Futures Trading Commission (CFTC). In May this collaboration led to 25 new cases focused on money laundering in particular, and with plans to increase standard inspections and on-site investigations into businesses in Malta, it appears there is a change to the country’s priorities.
Importantly, the report highlighted a problem for countries that choose to become tax havens. In some cases it was not that the Maltese authorities deliberately turned a blind-eye, but simply that they did not have the necessary knowledge to effectively tackle financial crime in the first place. Law enforcement appeared unable to even recognise when crime was occurring.
But this blurring of financial compliance will not help businesses if Malta does indeed become “greylisted” this year. While not as devastating as being blacklisted (the two occupants of this list are Iran and North Korea) there are significant detrimental effects to being put on the FATF greylist. Although this signals that the country is committed to developing AML/CFT plans (unlike the blacklist) it still sends out a warning signal to the world that this is a high-risk area, with the country in question subject to increased monitoring and potential sanctions from the IMF and the World Bank. Make no mistake, being put on the greylist will be catastrophic for Malta’s economy.
It remains to be seen how the work to avoid such a calamity will affect Malta’s tax haven status. Perhaps with an increased fight against financial crime there will be less ability to defend one of Europe’s most competitive tax regimes. But if Malta does not show they are genuinely committed to tackling this problem, then the pandemic disruption to the island’s tourism may be minor in comparison to the grey clouds that now approach their shores.
How will the UK prepare a supply chain for the distribution of the Covid-19 vaccines?
By Don Marshall, Marketing role at Exporta.
The challenge of mobilising a supply chain for the introduction of a global and nationwide vaccine will be enormously complex. The process will be costly, and it’s likely the figures will stretch to the hundreds of millions for both the production of the vaccine itself and its distribution across the UK. We must prepare and plan a supply chain strategy to ensure it reaches those most in need in a timely and safe manner.
The task of immunising a whole population is something that has never been planned or likely imagined by anyone within a standard supply chain. A supply chain that goes directly from the manufacturer to the end consumer, or user/ patient in this case, is complex and goes beyond the scope of any single logistics company. It would have to be conceived and delivered via a large joint effort and collaboration between multiple organisations. Effectively distributing the vaccine will depend on the source of manufacture, its storage requirements, and protection of the vaccines from manufacture through to patient administration.
The majority of vaccines require storage within a specific temperature range and need to be handled safely and in hygienic conditions. Depending on where the vaccines are manufactured, the transport legs will vary; if they are coming from overseas, air freight will increase cost and complexity. In addition to supplying the vaccine, syringes, needles and containers also need to be taken into account when preparing the supply chain.
Securing the specific types of boxes or containers i.e. the lidded containers normally used for transporting pharmaceutical products will mean acquiring them from all available stockists and manufacturers. Delivery vehicles would then need to be considered, with temperature-control factored in. The medical supply chain can inform their approach to distribution by assessing data from previous supply chains, and how large quantities of vaccines have been sent out in the past. Collating successful vaccine delivery examples from other parts of the world would be advantageous here, the more we can do to prepare for a logistical challenge of this magnitude, the better.
The distribution of this COVID vaccine will be unique in its scale and for that reason, additional supply chains will need to be mobilised. Apart from medical supply chains, those best suited for this type of transportation are the fresh/frozen food industries and supermarkets. I would mobilise these businesses to assist with the vaccine’s distribution wherever possible and use their car parks and facilities for the temporary medical centres needed to administer the vaccine to the public.
Using the food industry and supermarket networks would leave the current pharmaceutical supply chains intact for health services, pharmacies and the NHS. It would protect those vital services and continue to serve communities across the UK. Inevitably, it would place a short term strain on food supply chains, but these are supply chains that are well-equipped and versed in coping with excess demand i.e. the spike endured from the brief spell of public panic buying at the start of the crisis. With adequate resourcing and planning, I believe the UK supply chain can and will handle this challenge.
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