Multiplicity of banking systems, policies limit innovation in African payment solutions – Kolade
OMONIYI KOLADE is founder and CEO of SeerBit, a payment solutions provider with tailored solutions for businesses.An expert on Africa’s financial services sector, particularly in payments technology, Omoniyi has provided advisory services to some of Africa’s largest banks and has introduced innovative digital products to Nigeria’s banking sector.
In this interview with BusinessDay’s ISAAC ANYAOGU, he speaks on why cash is still king in transactions around the African continent despite a plethora of payment solutions being developed by innovative companies and the limitations of the current digital payment systems on the African continent arguing that this situation has implications for Africa’s free trade pact.
Despite a plethora of digital platforms which aim to facilitate cross-border transactions, cash is still king in Africa, why is this so?
Cash is still king for many reasons, including lack of trust for digital channels and unavailability of viable alternatives. However, there is an opportunity to solve these problems if innovators understand users who choose cash over digital channels and the underlying behaviours that drive this choice.
Simply building an app that allows people to make digital payments will not stop people from making payments with cash, you have to meet users where their needs are. For instance, people who do not trust digital banks will not move their funds to a digital bank simply because the bank claims to be trustworthy. However, understanding their other needs, such as credit services, and solving for those could influence their switch.
What would you say are the limitations of the current digital payment system on the African continent?
The multiplicity of banking systems and policies severely limit the ability of innovators to build solutions across the board. The regulations and systems in Ghana differ from those of Nigeria, despite being in the same sub-region. Kenya in East Africa also has its own system and rules, making it very complex to build digital payment systems that serve cross-border.
There are different consumer trends and behaviors to contend with in these different markets. Even within the same country, like Nigeria for instance, digital transactions are not uniformly accepted. You would find debit card transactions more popular in some states compared to others. The major limitation is the lack of uniformity which means innovators have to work extra hard to understand and build for this multiplicity in behavior, regulations, and systems.
In terms of existing solutions, the main limit is the focus of payment solutions on digital native users, maintaining the exclusion of the digitally excluded, with the hope that these users will magically come online and adopt digital.
How does Seerbit’s service offering improve upon these limitations?
At Seerbit, we are not just about processing payments. We strive to understand customer needs, particularly those operating offline, and see how we can help them cross the digital divide. This is what informs our product development.
Seerbit is a work in progress- we are working to launch a new feature soon that will bring payments closer to the financially underserved.
Our method is to study how people transact ordinarily, then see what opportunities exist to layer digital payments on their regular behavior without forcing change on these users. This way we can drive adoption of digital payments gradually.
Read also: A new era for digital payments in Africa
At SeerBit, we have a range of payment methods to cater to every business. We don’t just throw you a bouquet of solutions you don’t need. We walk with you to tailor your payment options and give you exactly what you and your shoppers need.
The impact of a preponderance for the use of cash in financial transactions means that the AFCFTA will serve only a few?
AfCFTA’s potential for African businesses is vast, particularly in terms of expansion and access to a bigger market. To meet this potential, the challenges with seamless cross-border payments need to be solved. Facilitating intracontinental trade will require convenient and fast movement of money across Africa. With the AfCFTA, a Ugandan business can easily sell their wares to customers in Togo. However, without digital payment options that facilitates easy movement of money between the two countries, the advantage of AfCFTA cannot be fully exploited.
Yet, most cross-border solutions being developed focus on digital native users, excluding the majority in Africa, as most people still transact offline. Cross-border trade will therefore be severely limited to only those who are digitally savvy.
How do we get AfCFTA to serve the majority?
To ensure that AfCFTA does not exclude the majority, we need to prioritize solutions that bring Africa’s offline businesses online and facilitate their adoption of digital payments. Solutions being developed should consider how traders in Lagos’s Balogun market can offer their goods for sale in Lome, even when they do not own smartphones.
What role do governments and fintechs play to help this cause?
Fintechs need to acknowledge the opportunities in the offline market, their uniqueness and build solutions for this large segment. Understanding these users, their preferences and the opportunities to digitize their activities will direct the development of products that truly serve the majority.
Government policies are important to enable and encourage solutions for cashless cross-border payments. Allowing the free flow of money across the continent digitally will require government’s support for innovators.
How do we get two offline merchants in different countries to transact seamlessly?
Cross-border payments and logistics are critical for intracontinental trade to thrive. For two offline merchants to transact seamlessly in different countries, they need the advantage of digital cross-border payment and efficient logistics across both countries.
What role does internet access play in facilitating payment solutions across the continent and what is the best strategy to ramp it up?
Payment solutions are mostly built for internet users. Universal internet access is essential for the majority of the population to take advantage of payment solutions. However, universal internet access will take a while to become a reality across the continent, regardless of the laudable efforts of private and public institutions to improve it. It is important to build solutions that fill the gap meanwhile, USSD and Agency banking solutions are good examples of these temporary stopgaps.
Apart from payments, what other challenges does the AfCFTA have to contend with in terms of trade?
Logistics is another challenge. The lack of quality road or rail network across the continent, will hamper movement of goods across the region. It is important for governments to facilitate the development of road and rail networks to support the intracontinental flow of trade that AfCFTA seeks to enable. Pending this development, it is important to efficiently leverage the existing transport and logistics options to drive AfCFTA’s momentum.
QUOTE: To ensure that AfCFTA does not exclude the majority, we need to prioritize solutions that bring Africa’s offline businesses online and facilitate their adoption of digital payments