Africa’s B2B payments landscape seems to be brimming with activity and growth, showcasing an array of high-profile companies dedicated to handling global merchants’ transactions. Yet, despite this outward appearance, the reality is that Africa’s payment sector is only scratching the surface of its true potential.
The diversity of Africa’s payment landscape is marked by a striking absence of widespread card penetration, with a preference for localized payment methods over traditional credit or debit cards. In fact, the continent boasts the world’s lowest credit card penetration at a mere 3%, which presents a persistent challenge to the expansion of digital payments across Africa.
This lack of uniformity extends to the payment preferences and technological infrastructures that vary significantly across different regions, presenting a formidable barrier for global merchants aiming to accept local payment methods. Each country in Africa presents its own unique mix of payment methods; for instance, Nigeria leans towards account-based transfers and debit cards, Kenya and Ghana favor mobile money due to lower bank penetration, while South Africa sees a higher affinity for cards.
Amidst these challenges, alternative payment methods (APMs) have emerged as the solution, effectively filling the gaps in financial inclusion by catering to diverse needs and preferences across the continent’s 54 countries. African consumers are increasingly drawn to various APMs like mobile money, bank transfers, digital wallets, and cash-based systems due to their simplicity, bypassing the hurdles associated with traditional digital banking systems. Notably, Africa currently hosts nearly 70% of the volume and over half of the global mobile money users.
Juliana Etcheverry, Director Of Strategic Payment Partnerships & Market Expansion at EBANX, highlighted the growing preference for APMs, emphasizing their instantaneous nature: “People want to be able to make instant payments and not have to jump through multiple hoops.” A recent TechCabal Live event, held in partnership with EBANX, shed light on the untapped potential of Africa’s digital payment market, drawing parallels with insights from Latin America.
The rise of APMs in Africa heralds a promising future for digital payments on the continent, offering widespread benefits. One of the primary obstacles for international businesses has been adapting to diverse local payment preferences, and APMs effectively bridge this gap, fostering inclusivity and accessibility in the digital marketplace. Businesses now have the tools to navigate this intricate landscape, providing consumers the flexibility to transact in ways that align with their habits and lifestyles.
Furthermore, APMs empower small and medium-sized enterprises (SMEs) by offering efficient and cost-effective payment solutions, catalyzing economic growth and fostering entrepreneurship. Wiza Jalakasi, Director of Africa Market Development at EBANX, echoed this sentiment: “APMs bridge the gap between the online and offline world, allowing digital payments through vouchers, mobile money, etc.”
The evolution of alternative payment methods in Africa also paves the way for innovation and adaptation. Companies that invest in understanding and integrating these methods position themselves at the forefront of innovation, gaining a competitive edge in this ever-evolving market. Aligning with local preferences enables businesses to build trust, enhance customer loyalty, and establish enduring relationships with African consumers.
Projections indicate that by 2025, at least 70% of all online transactions across Africa will utilize alternative payment methods like digital wallets, mobile money, and instant payments. This rapid ascent underscores one undeniable truth: these methods will be the driving force behind Africa’s digital economy.
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