Reaching financial inclusion has always posed a significant challenge, but it is increasingly becoming attainable.

This challenge is being tackled through a variety of innovations stemming from both traditional banks and non-banking sectors, especially fintech firms.

The shift toward digital financial inclusion is backed by strong economic fundamentals—lowering transaction costs can greatly enhance economic growth, as detailed in a World Bank report.

Africa has frequently been at the leading edge of advancements in payment technologies, illustrated by the introduction of Mpesa in 2007 by Vodafone and Safaricom in Kenya, which allows users to send and receive money effortlessly. Mpesa now serves over 60 million users and handles more than $1 billion (over R18 billion) daily.

“Africa’s payments sector is undergoing remarkable expansion,” claims a report from Swift (Society for Worldwide Interbank Financial Telecommunications).

“Electronic and instant payment systems are revolutionizing daily transactions in a region where cash still predominates, driven by a young population that is accelerating digital transformation.

“Currently, Africa accounts for 70% of the global mobile money market, which is valued at $1 trillion,” asserts Swift.

Rufaida Hamilton, head of payments at Standard Bank in South Africa, points out that a pivotal moment for Africa was recognizing that merely granting access to bank accounts was insufficient for true financial inclusion.

“In South Africa, the market potential for bank accounts has largely been exhausted, yet the demand for swift, convenient money transfers remains unmet by traditional payment services.

“The next stage in attaining financial inclusion revolves around broader payment accessibility.

“I do not foresee cash disappearing any time soon,” she continues. “Nonetheless, we believe that decreasing the reliance on cash provides significant benefits.”

“Upcoming payment solutions will include a variety of competing and collaborative options.”

South Africa’s financial services sector is more advanced than most in Africa, primarily due to substantial card payment usage.

This progress has been enhanced by card payment systems initiated by the government for 28 million social welfare recipients, ensuring extensive card access even among the most vulnerable populations.

Innovation in digitized payments and mobile money across Africa is emerging from various sources: banks, fintech companies, retailers, and mobile network operators, all aiming for effective collaboration amongst these players.

Currently, there are 28 instant payment systems across Africa, covering nearly as many countries (with some nations operating multiple systems), and while the technological capabilities for collaboration are nearly within reach, regulatory frameworks still need enhancement.

“The current challenge is for regulators to create an ecosystem that facilitates seamless transactions across these technological platforms for all participants,” says Hamilton.

“In South Africa, regulators are preparing to implement a framework that anticipates an increase in non-bank players entering these systems. This marks a significant shift. Banks have thrived in conventional banking services, but with fintech and non-bank companies now in the arena, they are providing payment services to those needing them. Regulators must keep pace with this trend.”

South Africa will lead the G20 working group on Accessible Instant Cross-Border Payments in 2025, focusing on accelerating cross-border transactions, enhancing accessibility, minimizing friction imposed by regulatory bodies, standardizing data storage practices, and reconciling varying market supervision standards.

Which technology will emerge as the leader in this evolving landscape remains uncertain; however, Hamilton anticipates that electronic instant payments will surpass alternatives like cash and cards.

Although card payments offer certain benefits—such as supporting loyalty programs—many Africans do not have access to these options. Physical cash poses risks of loss or theft and incurs hidden costs due to the necessity of traveling to bank branches or ATMs for deposits and withdrawals.

With smartphone penetration in South Africa exceeding 50%, the era of widespread, immediate electronic payments is tantalizingly close. An increase in usage will correspondingly fuel economic growth.

The capabilities provided by digital mobile devices promise a quick, easy, and thorough uplift for the country.

While cash circulation poses risks and costs, a World Bank report indicates that digital money drives greater economic growth.

Another critical area of focus within instant payments is cross-border transactions. Approximately 80% of cross-border payments in Africa are processed via the Swift-enabled correspondent banking model. Hamilton emphasizes that Africa needs to develop linking networks similar to Project Nexus in Asia, initiated by the Bank for International Settlements, to enable connection and instant transactions among various payment systems on the continent.

“We have moved beyond just having instant payment technologies; the next step is to remove regulatory hurdles to reduce friction between countries,” asserts Hamilton.

“A crucial move toward achieving financial inclusion involves distributing digital IDs to every African citizen. This will allow regulators to recognize reliable digital IDs, reducing transaction costs through bilateral agreements with South Africa. While 78% of people possess some form of formal identification in Africa, the emphasis must shift to digitization and building mutual trust in this identification system.”

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