But regardless of these seeming financial revolutions, cross border payments on the continents are still a major headache. A lot of people share Okey’s sentiments.
The reason for this is simply fragmented infrastructure across financial institutions on the continent, and most of the blame for this can be put on regulators.
There’s a stark contrast in countries, and here are some common examples;
- Nigeria’s financial infrastructure is largely bank-led and telcos are still fighting an uphill battle with regulators for a piece of the market.
- In Kenya, telcos and mobile payments are the predominant players with Safaricomm dominating a large part of the market.
In 2014, following insane hyperinflations, Zimbabwe was on its way to becoming the first truly cashless economy in Africa, but 6 years later that dream is still in the pipes.
Zim is still very cashless, but government interference and clashes with leading mobile money provider, Econet has stalled progress greatly.
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Lockdown highlights Zimbabwe’s desperate dependence on foreign remittances
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The fact that Nigeria’s central bank, in context of other African countries, is one of the most innovative is very telling of the rate of response to building infrastructure.
The aforementioned examples are not to deride these regulators as Africa is globally way ahead in terms of financial technology, neither is it to sidetrack from the conversation at hand. Rather, it is to exemplify the difference in financial structures.
As developed as these structures are in Africa, they still suffer government interference, and most importantly are not moving fast enough for the pace of development.
Of necessity, and solutions
In March 2018, most of Africa signed the African Continental Free Trade Agreement (AfCFTA); the world’s second-largest trade agreement to date.
AfCFTA is very important for a lot of economic integration, market unification and intra-Africa trade relations.
[READ:
The Next Wave: After this, AfCFTA what?
]
Unified payment infrastructures across the continent, which currently do not exist, are a very important requisite for trade agreements.
Cryptocurrencies are one of the theoretically feasible solutions that I mentioned in the intro of this newsletter. Their borderless nature, and non-conformity to government regulations make them the perfect solutions.
Startups like SendCash, Bundle, Bitsika, among others, are currently simplifying the process of sending money with crypto.
As good as digital currencies are, they are not widely adopted enough. CTO of Bundle, Taiwo Orilogbon said that
“currently, only 1.4 million people out of 1.2 billion people in Africa use crypto today.”
While this is a statement of the opportunities in the market, it underscores that crypto is not ready for the urgent need for a unified payment system across Africa.
‘Then what?’
In this case, it’s trickier to ask regulators to do something. What should they do? I mean, beyond making better regulatory environments, I’m not sure what’s next.
Open source software, Mojaloop is a very seemingly viable option for interoperable infrastructure in Africa.
A definition from a bootcamp by investment firm, DFS Labs, succinctly defines Mojaloop as:
“A reference model for payment interoperability, that can be used to overcome barriers that have slowed the spread of digital financial services. Whole, adapted, or as a blueprint – the Mojaloop Foundation’s open source software can be used by organizations to build interoperable, digital payment systems that enable seamless, affordable financial services between individual users, banks, government entities, merchants, mobile network operators, providers, and technology companies – connecting the underserved with the emerging digital economy.”
Simply put, a Nigerian fintech startup plugged into Mojaloop can enable me to pay somebody in Congo DRC regardless of what platform they are on.
The possibilities are endless, and it seems like an awfully straightforward answer to a complex problem.
