International Payment Solutions in Sub-Saharan Africa: an overview

There is not as much comprehensive info, including statistics, available about international payment solutions in sub-saharan Africa – compared to the other parts of the world. It’s quite understandable, given that sub-saharan African countries are amongst the late emerging markets in the global field of e-payments, e-banking, and e-commerce. And it might take years before all of Africa finds its place in international trade via digital means. There are many other obstacles that hinder Africa in this race to embrace FinTech (Financial Technologies) and derive the benefits of using them. This article will introduce FinTech and the avantages they offer, but most importantly – since they represent a major part of FinTech, some of the main international payment solutions will be presented – with the focus on sub-Saharan Africa. Note that this focus on international payment solutions is not a coincidence. Serious predictions are that cross-border e-commerce will reach $1 trillion in 2020.

What are FinTech?

Basically, FinTech are new technologies: online computer programs, software, apps, used to complete, or compete with traditional financial services – such as banks.

The main advantage of FinTech is the offer of safer, cost-efficient business models enabling the exchange of money and other measures of value – for instance, cryptocurrencies.

FinTech embodies endless opportunities for merchants to sell their products on a global scale. It also provides faster, cheaper solutions for employers to pay their freelancers and those doing remote working.

Recent research has shown that several online retail sites have lost customers because their payment processes were not adequate or convenient for the latter. This emphasizes how having access to proper, secure, affordable and easy international payment solutions is now a decisive factor for the sustainability of businesses on the web – and especially, with so much competition nowadays.

Why is it crucial for sub-Saharan Africa to jump on the FinTech bandwagon?

Most African countries need to catch up with the rest of the world in terms of development, modernisation, standard of living, political stability, law and order, and so on. Moreover, according to a World Bank report (2018), “an estimated 413 million people in Africa currently live in extreme poverty — more than half of the world’s total”. Now I will tell you why Africa needs to up its game very soon. According to the UN’s World Population Prospects (2017), “[m]ore than half of the anticipated growth in global population between now and 2050 is expected to occur in Africa”. This report furthermore stated that “[o]f the additional 2.2 billion people who may be added between 2017 and 2050, 1.3 billion will be added in Africa“.

In my opinion, knowing the aforementioned prospects, Africa should seriously start planning now to support this upcoming, significant population growth. Human capital is not nothing – it’s a resource too – but to get the best of it, it’s necessary to equip and support it. Thus, it implies a pressing need for massive job-creation, important investments in education and training to produce more African entrepreneurs and an African population that’s skilled (to international standards). This will enable the latter to sell their services in Africa, but more interestingly, on a global scale, and finally, achieve Africa’s amazing potential. Moreover, to be able to sell products and skills internationally, the right infrastructure is a prerequisite and FinTech are part of the solution.

Internet penetration and mobile use in sub-Saharan Africa

A report by Ecobank research (2018) found that “[d]espite the inexorable spread of mobile phones and Internet connectivity across Africa, the high cost of data remains a major blockage to digital innovation“.

According to recent statistics, there are around 211 million internet users in sub-Saharan Africa. You’d think it’s a lot, but it isn’t considering this Africa region counts a population of around 1.07 billion. However, many sources state that by 2025 internet penetration will increase by 130% in Sub-Saharan Africa. Mobile subscriptions are on the rise as well. It is projected that by 2025, there will be around 638 million mobile subscriptions in this part of Africa, out of the global subscription of 5.859 billion. Click here for more information.

Mauritius – one of the most advanced countries in sub-Saharan Africa

The Republic of Mauritius counts around 1,265,309 people (as at 31st of December 2017). According to the Statistics Mauritius office, the total number of mobile cellular subscriptions is generally on the rise. The number of mobile cellular subscriptions is currently around 1,839,500; with prepaid subscriptions at 1,677,800 and postpaid subscriptions at 161,700. Moreover, the number of internet subscriptions is also increasing, with currently about 1,248,000 registered.

All in all, we can observe that the number of internet and mobile phone users in sub-Saharan Africa is growing steadily. This is a great news for Africans in this region as it means that in the few years, the digital divide will become narrower and narrower… until some day soon it won’t be anymore. Let’s stay optimistic!

International payment solutions in Africa

There are the traditional ways to send and receive money to and from around the world; namely SWIFT bank transfers, cash-in-advance, letters of credit, documentary collections, bills of exchange (cheques, promissory notes), open accounts, consignments, telegraphic transfers, etc. You can use domestic and offshore commercial banks as well – to do internet banking / telebanking; use credit cards, debit cards and charge cards and mobile banking.

Those transactions done through banking institutions tend to be the safest, but also the costliest. Furthermore, note that according to official sources such as the World Bank, sub-Saharan Africa is the second highest population of unbanked adults in the world, at about 350 million people, or 17% of the global total. This means two-thirds of sub-Saharan Africans do not have a bank account! So most won’t even go to banks for their money transactions.

Fortunately, there are other types of services for international payments – these are remittance transfer providers such as Western Union and Money Gram. We talked about them quite a bit in our article International Payments Methods in Madagascar. Though those remittance services are quite secure, they involve – on one hand, low payment thresholds and on the other, high fees for the user.

Then, there are FinTech companies. Yes, Africans do use big American and European international payment solutions such as Paypal, Skrill and the like. The aforementioned are so well-known, I will not describe them. Also, there’s Payoneer (American) – becoming very big on other continents but still quite unknown in most African countries. In addition, there’s Direct Pay Online and Interpay Africa – that actually have offices based in sub-Saharan Africa.

Payoneer

I’m going to talk about Payoneer because the Stileex Post team recently attended a video conference about this “nanobank” – as Mor Rintzler, its Partnerships Manager, called it at that event.

Payoneer, present in many countries across the globe, aims to have more African users. At the moment it has some users in North Africa, and in sub-Saharan Africa – mostly in Nigeria, Kenya and South Africa.

Payoneer Logo

This FinTech company supports 70 languages to be more accessible for its users; has strong global financial partners and affirms to abide to the respective regulations of each country where its services are accessible. Good reviews online emphasize that it’s a great solution to receive payments or pay remote staff / freelance workers directly.

Nicolas Goldstein, serial entrepreneur – also known for being behind the success of enterprises such as Talenteum (African leader in Telework), Business Startups Incubator and Offshore Development in Mauritius – shared his experience as a Payoneer user. He was the one who organised the aforementioned video conference.

“Payoneer is the perfect deal for me. I use it even if I also have bank accounts. It’s fast, simple and cost-effective. I registered, and in 2 days my info was verified and I could start using my account”, Nicolas Goldstein told us.

Still, from reviews I have read on the web, Payoneer is not perfect (well, what is?). Sure, it promises no hidden costs (unlike several international payment solutions – where you don’t know there are extra fees until you do). However, according to reviews, it has a pricey annual fee on debit cards, high credit card transaction fees, and for individuals, $2000 is the maximum that can be sent via credit card.

Direct Pay Online (DPO)

Direct Pay Online has two offices in the world, and one of them is based in Kenya – with a very African team. This is why I have chosen to talk about this FinTech company. It boasts a highly secure payment platform for businesses – to accept credit cards, mobile payments and cross-border payments.

Direct Pay Online Logo

On its website, DPO explains how it started in Africa. “Back in 2006 we identified a gap in the African online payments landscape… We wanted not only to fill that gap but to do more than that. By enabling customers and merchants to transact securely online and offline we were able to facilitate the growth of local businesses, from airlines to hotels and eShops”. (DPO)

Today, DPO offers services to 16 African countries, namely Ethiopia, Mauritius, Nigeria, Rwanda, Zambia, Tanzania, South Africa, Uganda, Botswana and so on. It is today the biggest pan African (payment service provider) PSP.

Interpay Africa

Three months ago, Emergent Technology Holdings LP (“EmTech”), a global financial technology company, bought Interpay Limited (“Interpay Africa”), a payments processor based in Ghana. So Interpay Africa was first a purely African enterprise. This is why I’m also mentioning this Fintech company. It connects African sellers to local and global payments options across mobile money, traditional payment and local bank platforms. Interpay Africa has offices in sub-Saharan Africa, specifically in Ghana and Benin, amongst other locations.

Interpay Logo

The CEO of Interpay, Saqib Nazir, seems content about the acquisition because, I believe it means that, now the company has more funding to develop in Africa and surrounding regions.

Africa presents incredible e-commerce growth opportunities. The young population of over a billion people are rapidly embracing technology innovation and are increasingly demanding goods and services, both local and foreign. The payments landscape is developing fast. We are excited to be part of EmTech’s vision to further advance local payment services across the region and to provide the best regulatory, tax and FX solutions to global merchants”, states Interpay Africa’s CEO.

Well, I don’t know about you, but this vision sounds good to me! Go African-born FinTech!

Conclusion

In the last few years, more sub-Saharan African FinTech start-ups have been emerging and getting the attention of (international) investors. Some African FinTech companies started on the mobile payment market – more popular than banking services in Africa – since there are so many unbanked adults – and are now thriving… However, their services are mainly focused on the national payment, rather than international payment market. This is why I am only mentioning them here. Here are a few honourable mentions: M-Pesa, Kenya’s first mobile wallet launched in 2007; also Flutterwave, a Nigerian startup that aims at unifying Africa’s fragments system through a single API; and Cellulant, a digital payment platform started by African entrepreneurs in Uganda, and now managing 12% of Africa’s digital payments.

I mean, I totally get Cellulant’s vision. Such a strong statement: Build a world class business led by entrepreneurial, value-driven people; for Africa, by Africans, in Africa. Maybe this is exactly what Africa needs? And no disrespect intended to those international investors that are supporting African companies, you have a lot of merit as well.

My conclusion is that FinTech on the second largest continent in the world has a promising future, and will contribute consideraby to sub-Saharan Africa’s global financial inclusion.

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