digital payments - Afrikan Heroes

Africa’s Digital Payments Race Becomes a Scramble

May 8, 2021

By Ed Cropley

The prospect of a cashless Africa has triggered a scramble for control of its payments plumbing. The continent’s top telecoms operators have become big financial players thanks to their “mobile money” networks, which provide basic banking to tens of millions through handsets. If China is a guide, that could make them gatekeepers to a fintech revolution.

Africa’s patchy personal banking industry helped make it the world leader in mobile money, which lets consumers and small enterprises zap each other cash via a bare-bones cellphone handset. For the industry’s four big players – France’s Orange (ORAN.PA), South Africa’s MTN (MTNJ.J), Britain’s Vodafone (VOD.L) and Airtel Africa (AAF.L), controlled by India’s Bharti Airtel (BRTI.NS) – the coronavirus pandemic has affirmed the social importance of the service to the region’s billion people. It’s also a reminder of the industry’s commercial fragility.

Restrictions on movement and increased wariness of handling physical cash helped lift sub-Saharan mobile money transaction volumes 23% to $490 billion last year, greater than the GDP of Nigeria, the region’s biggest economy. Active users increased by 18% to 159 million, according to the GSMA, an industry body. However, that boom failed to translate into a windfall for operators. Revenue fell 24% in the first quarter of 2020, the GSMA reckons, as governments pressured mobile money providers to reduce commissions on simple transactions to cushion the economic blow of lockdowns.

Unsurprisingly, that has made operators nervous. Such fees typically bring in 90% of mobile money providers’ revenue and, thanks to a hefty EBITDA margin of nearly 50%, an appreciable chunk of their parent companies’ overall bottom line. MTN’s MoMo unit brought in $437 million of EBITDA in 2019, accounting for 10% of the $12 billion group’s total. More importantly, the higher valuation multiples investors bestow on fintech-related enterprises mean mobile money represents an outsize chunk of their telco owners’ worth. Last month, Mastercard (MA.N) invested $100 million in Airtel Africa’s mobile money division at an enterprise value of 12 times the unit’s EBITDA. By that yardstick, MoMo would be worth more than $5 billion, nearly a third of MTN’s total value, including debt.

The providers’ other big worry is the gradual rollout across Africa of 4G telephone networks, along with cut-price smartphones made by Chinese vendors like Transsion (688036.SS), Huawei Technologies and Xiaomi (1810.HK). Together, these threaten mobile money’s low-tech monopoly by opening the door for lenders like South Africa’s Standard Bank (SBKJ.J) to offer basic digital banking to the masses.

Happily for operators, the two threats might combine to deliver a solution. Though lower fees reduced commission revenue for mobile money operators, expanded customer bases represent a new opportunity. The role model is Ant, the Chinese financial giant that grew out of the payments arm of the Alibaba (9988.HK), e-commerce behemoth. For the billion-plus users of its Alipay service, cash transfers are largely free. The bulk of its revenue now comes from selling them investment products, loans and insurance.

The switch has been dramatic. Ant’s fintech revenue more than doubled to $10.4 billion between 2017 and 2019. More importantly, revenue per user rose by a third every year, to $15 in 2019.

Africa’s average per capita wealth is only a fifth of China’s. However, its consumer banking services are arguably even worse than in the People’s Republic, while the absence of social safety nets beyond immediate family creates a fertile market for products like insurance. Furthermore, Africans have shown they are happy to pay for services that make life easier. Last year, the pioneering M-Pesa mobile money service owned by Vodafone offshoot Safaricom (SCOM.NR) brought in $33 for each of the 25 million Kenyans – over half the country – that used it.

If the mobile money providers could eventually squeeze an Ant-style $15 of extra revenue out of each of their 159 million users in sub-Saharan Africa, they would generate $2.4 billion in additional annual revenue. Assuming a 50% EBITDA margin and valuation multiple of 12 times, that would represent more than $14 billion of additional market worth.

The prospect of such grand prizes has created a flurry of activity. African banks are scrambling to launch basic mobile accounts. M-Pesa is hawking insurance and savings products to Kenyans. Orange is shunting its mobile money customers to its new digital-only Orange Bank Africa. Airtel Africa and MTN are both contemplating initial public offerings for their respective units, presumably to enable nimbler dealmaking with prospective partners. The scramble for Africa’s mobile money is just around the corner.

Ed is Associate Editor of Reuters Breakingviews.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Algerian Postal Service Just Extended Deadline For Startups To Apply To Digitize Its Payment System

March 2, 2021

Algeria Post, the national postal service, has extended deadline for submitting applications for the “Approved electronic payment agents” project until March 15.

“The General Directorate of Algeria Post brings to the attention of all companies interested in the national call for expressions of interest relating to the approval of micro enterprises and startups, supporting Algeria Post in the generalization of electronic payment resources and the promotion of electronic payment activity, that the period for submitting applications is extended by 15 days from the date initially scheduled for February 28, 2021 “, according to the press release.

Algeria Postal service payment — *La Grande Poste wants to digitise its processes, a great move that will significantly improve the country’s performance on the world B2B ecommerce index. Photo credits: DZBreaking.com*

Here Is What You Need To Know

According to the country’s Minister of Post and Telecommunications, Brahim Boumzar, the objective of the partnership with startups is to support the postal sector to accelerate the popularization of electronic payment.

The minister explained that the leaders of startups will be certified as approved financial agents after meeting the conditions specified in the specifications.

The startups will also be responsible for supporting economic operators in the procurement process with Algeria Post, until various means of electronic payment are obtained.

The minister also said that the startups can use payment services such as the QR Code, as well as the installation and maintenance of equipment.

This approach is part of the realization of the commitments of the President of the Republic, who attaches great importance to young entrepreneurs to revive the national economy.

Companies interested in this project are invited to download the specifications free of charge via the official Algerian Post website, the statement said.

A Country Greatly Supporting Startups In Recent Times

In December 2020, Algerie Telecom, Algeria’s state-owned telecom operator, unveiled new specifications for its calls for tenders. The new specifications would facilitate access of over 2,300 technological microenterprises to public procurement.

Labelled startups and incubators in Algeria would also be the greatest beneficiaries of the country’s newly passed finance law. The 2021 Finance Bill which was submitted to the country’s Council of Ministers on Sunday 04 October 2020, provides for changes in taxes (Tax On Professional Activities, TAP; and Value-added Tax VAT). Under the law, companies in Algeria with a startup label will be exempt from several taxes, starting with the TAP (tax on professional activity) and the IBS (tax on corporate profits. companies) for a period of 2 years from the date of obtaining the said label.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Algeria Postal service payment Algeria Postal service payment

Startups To Take Over Payment Digitization For Algeria’s Postal Service

January 18, 2021

The Algerian government is increasingly showing great friendship with the country’s startup ecosystem. Apart from recently tearing down the boundaries hitherto restricted startups from participating in Algerie Telecom’s public procurement processes, the country’s Minister of Post and Telecommunications, Brahim Boumzar, has announced the official launch of a partnership project between Algeria Post and startups.

Minister of Post and Telecommunications, Brahim Boumzar

Here Is What You Need To Know

According to Mr. Boumzar, the objective of the partnership is to support the postal sector to accelerate the popularization of electronic payment.

The minister explained that the leaders of startups will be certified as approved financial agents after meeting the conditions specified in the specifications.

The startups will also be responsible for supporting economic operators in the procurement process with Algeria Post, until various means of electronic payment are obtained.

The minister also said that the startups can use payment services such as the QR Code, as well as the installation and maintenance of equipment.

This approach is part of the realization of the commitments of the President of the Republic, who attaches great importance to young entrepreneurs to revive the national economy.

A Country Greatly Supporting Startups In Recent Times

In December 2020, Algerie Telecom, Algeria’s state-owned telecom operator, unveiled new specifications for its calls for tenders. The new specifications would facilitate access of over 2,300 technological microenterprises to public procurement.

Labelled startups and incubators in Algeria would also be the greatest beneficiaries of the country’s newly passed finance law. The 2021 Finance Bill which was submitted to the country’s Council of Ministers on Sunday 04 October 2020, provides for changes in taxes (Tax On Professional Activities, TAP; and Value-added Tax VAT). Under the law, companies in Algeria with a startup label will be exempt from several taxes, starting with the TAP (tax on professional activity) and the IBS (tax on corporate profits. companies) for a period of 2 years from the date of obtaining the said label.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Kenya Launches Plans To Fully Digitalise The Country’s Financial Services Sector

January 4, 2021

Up until January 2021, Kenyans are invited to comment on a new policy document launched by the Central Bank of Kenya. This is the latest move by the east African country to promote the use of cashless transactions. Consequently, through the policy document, the bank is asking the providers of digital financial services in the country to work together and encourage adoption.

“Though the industry moved to enable interoperability of mobile wallets in 2018, this is limited to only P2P payments, and is yet to be expanded to both merchant and agent interoperability and even to work seamlessly at P2P,” noted the draft of the Kenya National Payments System 2021–2025 report.

Here Is What You Need To Know

The CBK’s latest policy document outlines proposals on tap that could change the way FinTechs and mobile payments firms operate.
According to the draft report, Kenya’s National Treasury and Planning agency is finalizing a digital finance policy to ensure that financial services are digitally connected.
The central goals include open infrastructure, consumer protection, regulation and more.

“Although … Kenya’s payments landscape has undergone dramatic changes in the last ten years, there are still areas with considerable opportunities and improvement such as growth of the electronic payment instruments,” the report indicated.

Kenya digitalise financial services Kenya digitalise financial services

Digital payment acceptance in the country has grown over the last five years, with several new products launched from collaborations between industry players, the report stated. One game-changer was the introduction of government-to-person (G2P) payments, which enabled mobile payments for public services.
The anticipated release of the National Integrated Identity Management System (NIIMS) and the Huduma Namba “will provide a key impetus to further deepen the adoption, safety and robustness of digital payments,” the report said.
CBK data indicates P2P payments surged 87 percent between February and October, with 2.8 million new mobile users.
The move was intended to encourage the use of mobile payments as a way to help prevent the spread of COVID-19.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

How Digital Payments could Foster African Development

November 2, 2020

By Murray Gardiner

The World Bank has estimated that Africa could potentially hold 90% of the global poor population by 2030 and has recently cut its economic growth predictions to between -2.1% and -5.1% in 2020 from the 2.4% of 2019.

The situation has been significantly worsened by the global pandemic, as the continent hits its first recession in 25 years. But this is not the picture that defines a continent that has long defied expectation and prediction.

In fact, a young population, a growing consumer market, and the rapid movement towards mobile inclusion and connectivity are shifting the conversation. Africa is poised on the cusp of change introduced by mobile and internet technology.

Africa has undergone a remarkable journey over the past 30 years. It has not only leapfrogged legacy technology and systems into a more relevant future, but it has done so in spite of challenging circumstances. This is particularly relevant when it comes to mobile – the technology, the connectivity, and the financial inclusion.

To date, according to the GSMA 2019 Mobile Money Report, there are more than one billion mobile money accounts in Africa that account for 57% of mobile money transaction values.

Over the next five years, also according to the GSMA, it’s expected that 84% of Africans will have access to a SIM connection and that mobile payments will play a critical role in empowering individuals, businesses and the economy as a whole.

This is the principle that’s dominating the current approach taken by the World Bank in an effort to provide Africa with much-needed support in the wake of COVID-19. The organisation is focusing on putting women at the centre of digital payment programmes and leveraging digital technologies to improve trade, government and resource management.

This underpins the organisation’s focus on national payment systems that are secure, affordable and accessible as these are the tenets that underpin an economy that’s focused on financial inclusion and stability.

African payment solutions are critical to minimising fraud while improving the free flow of funds to boost business and economic activity. Payment technology that allows individuals from all walks of life to manage their money securely is the equivalent of putting a bank into every person’s pocket.

Digital payments equalise engagements while improving transparency and control over finances and business. They also empower the small to medium enterprises (SMEs), giving them greater scope for inclusion and access to customers and markets.

This has become particularly true in the current environment. Digital payments are now, more than ever, the key to unlocking business growth on the continent. The rigorous regulations put in place by African countries to minimise the impact of the virus have led to inventive approaches to shopping and living. Digital payment platforms are significantly safer than cash and are increasingly being leveraged by governments and organisations to improve customer access to resources and services.

According to a study released by McKinsey & Company in June 2020, ‘innovation in payments should be one component of the industry’s response to the crisis’, and this should include promoting awareness of digital payments, partnering with other industries, and introducing new and relevant products.

In Africa, digital payments are more than just keys to open the doorways of financial inclusion, they are increasingly the steps that will take the continent out of recession and into a more dynamic and inventive future. This view is echoed by the investments made by the World Bank and organisations such as SWIFT and Bluecode Africa; programmes such as the African Continental Free Trade Area (AfCFTA), and the International Monetary Fund.

Investments that include cross-border payment platforms increased commerce capacity, cost management, digital innovation, and the empowerment of individual, micro-enterprise and SME. It’s time to educate businesses and individuals as to the costs and risks of cash as opposed to digital. To showcase the value of digital payments in not just opening up new markets and opportunities, but in providing tighter cash flow control at a better price point than cash.

The continent may not be showered in stunning statistics, few continents are at this point in time, but it is hovering on the edge of a future that has the potential to transform poverty, business and economy.

Murray Gardiner, MD of Bluecode Africa

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

South Africa experiencing high adoption of digital payments

October 11, 2020

The accelerating rate at which retail merchants are enabling consumers to pay digitally at point of sale is said to be fueling the growth of digital payments in South Africa. This is according to FNB, which revealed that its Scan-to-Pay and Tap-to-Pay functionality on the FNB APP recorded the highest month-on-month usage growth in August 2020 since launch. The Bank states that month-on-month transaction volumes on Scan-to-Pay – which allows users to scan a QR Code to make secure payments at a physical point of sale or on an online merchant website – grew by 36% in August while values increased by 39%. Similarly, month-on-month usage of Tap-to-Pay functionality – which allows users to pay for goods by simply tapping their smartphone to pay at a point of sale – increased by 48% with values growing by 54%.

Chief Executive of FNB Retail and Private Banking, Raj Makanjee

The insights are consistent with the 28% increase in FNB APP usage volumes that was reported for the previous financial year. This is also in line with customer behaviour shifting towards contactless in general, as customers realise the convenience and security benefits with contactless card transactions at Point of Sale (POS) growing month-on-month at 16.4%. Chief Executive of FNB Retail and Private Banking, Raj Makanjee says, “Digital payments have received a significant boost over the course of the COVID-19 pandemic as more consumers and retailers are embracing the need for safety and efficiency. Digital payment methods are equally important for consumers because people can be less reliant on cash and cards by choosing to pay using their cellphone. In our case, this affords our customers the added safety of using a trusted and secure platform of our FNB APP.”

According to the bank, consumers will soon be able to take their digital payment journey one step further by using Virtual Cards. In the coming months, Android App customers with a compatible Android device will also be able to add their Virtual Card for Tap-to Pay on the App for contactless payments convenience.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry