Africa’s instant payment systems are growing, but challenges remain.
The State of Inclusive Instant Payment Systems (SIIPS) 2024 report, released by AfricaNenda, shows how these systems are evolving and what needs to improve.
What are Inclusive Instant Payment Systems (IIPS)?
Inclusive Instant Payment Systems (IIPS) make digital payments fast, affordable, and accessible to everyone.
They allow people and businesses to transfer money in real time, 24/7, using digital platforms like mobile phones and online services.
IIPS work across different financial institutions, such as banks and mobile money providers, ensuring everyone has a fair chance to use them.
Slow Progress Toward Inclusivity
Despite processing 49 billion transactions worth $1 trillion in 2023, none of Africa’s 31 instant payment systems have reached full inclusivity.
These systems are categorized into three levels. Basic-level systems offer limited functionality, such as person-to-person (P2P) and person-to-business (P2B) payments.
Progressed systems include multiple participants and fair governance but still have gaps. Mature systems do not exist yet.
A mature system would cover all use cases, offer low costs, and provide robust ways for users to resolve issues.
Challenges Holding Systems Back
The report identifies key barriers. Limited access remains an issue, as over 400 million Africans lack financial services.
Many systems fail to serve women and low-income groups, who often face obstacles such as lack of documentation or mobile phone access.
Most systems do not offer strong ways for users to resolve problems, leading to a lack of dispute resolution. This discourages trust and wider adoption.
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Additionally, many systems work only on smartphones, excluding people with basic phones, which are still common in rural and low-income areas.
Strict regulations also limit participation by new fintech companies, creating significant regulatory hurdles and stifling innovation.
Trends and Numbers
Seven countries, including Kenya, Nigeria, and Ghana, have multiple instant payment systems.
Mobile apps are the most common channel, supported by 30 systems, as they offer a user-friendly experience for those with smartphones.
USSD, which works on basic phones, is the second most popular but comes with security risks, such as unencrypted messages.
All systems allow P2P payments, and 24 enable P2B transactions. Only 6 systems support government-to-person (G2P) payments like pensions and social benefits.
Cross-border payments are even rarer, supported by just 6 systems. These gaps highlight the need for broader use cases and better coverage across the continent.
Opportunities for Growth
There are several opportunities for growth. Systems like Nigeria’s NIP show promise but need broader services to improve governance.
Offline payment methods and near-field communication (NFC) technology can help include more people and expand access.
For example, offline solutions could enable users without internet access to make digital payments. Fees should remain affordable to encourage use, especially for low-income users, helping to lower costs.
Secure systems and quick dispute resolution can attract more users and build trust. Transparency in fees and payment processes is also critical to gaining user confidence.
Instant payment systems can also become part of digital public infrastructure (DPI), which includes digital IDs and data sharing.
DPI is crucial for connecting financial systems with other public services, such as healthcare or education payments.
For IIPS to integrate into DPI, stakeholders must collaborate to create standard protocols and improve interoperability between systems.
This would make payments seamless and accessible across different platforms and countries.
What Users Think
Research from countries like Uganda and Algeria shows most users make weekly payments, with daily use higher in Guinea.
Barriers include poor networks, low digital skills, and fear of fraud. For many, the ability to make payments regularly depends on reliable mobile networks and simple user interfaces.
Regular income payments, such as salaries or government aid, and the convenience of digital transactions drive frequent use.
However, users often report frustrations with network interruptions and poor customer support when issues arise.
Next Steps for Stakeholders
Operators should add ways to resolve user problems and adopt fair pricing models. They must also improve system reliability and ensure users have access to simple, intuitive interfaces.
Regulators need to make fintech licensing simpler and support digital KYC processes, enabling more players to enter the market.
Development partners can assist in system design, provide funding for technological upgrades, and share evidence-based advice for policymakers.
Participants, such as banks and mobile money providers, should push for interoperable systems and adopt technologies that are easy for users to access, like QR codes and NFC.
Conclusion
Africa’s instant payment systems are growing, but there’s work to do. IIPS must address accessibility gaps, lower costs, and build trust to become truly inclusive.
By integrating into digital public infrastructure and fostering collaboration among stakeholders, these systems can drive financial inclusion for millions of Africans.
A focus on usability, reliability, and affordability will ensure that no one is left behind in the digital payment revolution.
