Africa is becoming a major player in the global fintech landscape. McKinsey (1) estimates that the African financial services market could generate as much as $230 billion in annual revenues in 2025. The reason for this is mobile technology, fintech innovation, and efforts to improve access to financial services. With mobile money in the lead and fintech companies introducing new solutions, digital payments are transforming commerce, banking, and everyday transactions across the continent.
Akurateco’s latest whitepaper, “Shaping the Future of Payments in Africa: Exploring Growth Opportunities for Payment Service Providers and Fintechs” explores the challenges and opportunities facing PSPs in Africa, providing actionable strategies for launching and scaling payment businesses in this fast-growing market. In this article, we summarise the key insights.
Challenges for payment service providers in Africa
Operating as a payment service provider (PSP) brings some unique challenges in Africa. They include a diverse regulatory environment, fragmented payment systems, security concerns, and more. Yet, they will not become a stumbling block for entering the booming market when they are addressed in advance.
Regulatory complexities and delays associated with market entry
If a PSP is to operate smoothly within a market, regulatory compliance and the differences between each market must not be overlooked. Even though Africa’s evolving regulatory landscape is critical for a sustainable financial ecosystem, it is a double-edged sword for PSPs. Licensing for PSPs is long and complex. In some countries, bureaucratic procedures or unclear licensing demands also contribute to delays in approvals.
For instance, Nigeria’s Central Bank has introduced strict licensing policies for PSPs, resulting in lengthy approval times. In contrast, Rwanda has created a more fintech-friendly regulatory environment, fast-tracking licensing for digital payment providers. Payment service providers with current licenses in other countries can facilitate the process of accelerating approvals by adhering to international compliance standards while also signing strategic agreements with local parties.
Understanding the Know Your Customer (KYC) verification process
KYC verification is critical in the fight against fraud and money laundering. Yet, it is another major regulatory hurdle. In many African countries, there’s no single national ID system. Currently, different regions within the same country provide different forms of identification for verifying customers.
To mitigate risk, PSPs have turned to state-of-the-art digital identity verification tools, including biometric authentication and AI-powered document verification, to reduce risk. Plus, working with local governments and telecom providers can facilitate KYC without sacrificing a speedy, compliant onboarding process.
Interoperability and fragmented payment systems
The adoption of mobile money is widespread, but moving funds between providers and over borders does not always work seamlessly, owing to interoperability issues in Africa. However, there is significant regional and local work underway to improve interoperability. PAPSS (Pan-African Payment and Settlement System) aims to unify cross-border payments by enabling instant currency transfers between countries using their respective currencies. Locally, telecommunications companies are also working towards improving interoperability of mobile wallets. PSPs need to put their effort into integration with these emerging interoperable systems in the future to facilitate a smooth payment experience.
Preventing fraud and ensuring security
A major worry for PSPs operating in Africa is security. Cyber threats such as hacking, malware attacks, and payment fraud are becoming more prevalent in digital payments. Positive Technologies’ Cybersecurity Threatscape for African Countries 2022–2023 (2) reported that 97% of leaders of large financial institutions in Africa believe that cybercrime poses a big threat.
To combat it, PSPs are investing in AI-powered fraud detection tools to monitor transactions in real-time and identify unusual patterns. Employing security techniques like multi-factor authentication (MFA), tokenisation, and end-to-end encryption is also critical to ensuring sensitive payment data is stored safely.
Infrastructure challenges and technological adaptation
Infrastructure limitations, including unreliable internet connectivity, pose significant challenges for PSPs operating in Africa. However, Statista forecasts(3) that the number of internet users in Africa will continuously increase by 2029 by a total of 327.8 million users, increasing by 51.5%.
To ensure seamless payment processing, PSPs are adopting a hybrid infrastructure model that combines cloud-based solutions with local on-premise systems. Implementing backup systems and optimising payment platforms for low-bandwidth environments also enhances accessibility and user experience.
Opportunities for payment service providers in Africa
Despite all the challenges, Africa’s digital payment landscape presents immense growth opportunities for PSPs willing to innovate and adapt.
Expanding financial inclusion through mobile money
The widespread adoption of mobile wallets highlights the potential for PSPs to innovate in this space. According to the GSMA 2023 State of the Industry Report (4), over 184 million Africans signed on to mobile money by 2022, bringing the total number of registered accounts in Sub-Saharan Africa (SSA) to a record high of 763 million — almost half of the global total. Mobile money transaction values also increased to $832 billion, a growth of 22%. To improve interoperability of mobile wallets, PSPs can adopt government-driven cashless policies.
Enabling cross-border trade and remittances
Cross-border trade is a significant economic driver in Africa. The PAPSS system enables cross-border payments in local currencies, reducing transaction costs. PSPs that integrate with PAPSS can capitalise on the growing demand for intra-African trade and cross-border remittances.
E-commerce growth and digital commerce opportunities
Africa’s e-commerce market is expanding rapidly, driven by rising internet penetration and increasing smartphone usage. Statista predicts (5) that Africa’s e-commerce sector will reach $46 billion by 2025. PSPs can seize this opportunity by offering tailored payment solutions for e-commerce and social commerce platforms, including payment gateways and payment orchestration solutions.
Digital currency adoption and crypto integration
As central banks explore Central Bank Digital Currencies (CBDCs), PSPs have the opportunity to integrate digital currencies into their payment ecosystems. Nigeria’s eNaira and Ghana’s eCedi are pioneering efforts in this space. Additionally, facilitating crypto payments or offering crypto-to-fiat conversion services can attract tech-savvy consumers and businesses.
Trends and prospects for digital payments in Africa
The future of digital payments in 2025 will be shaped by a few key trends within the region.
Mobile money and digital wallets continued growth
With the extensive penetration of smartphones and a push towards cashless societies, mobile payments will continue to be the most prevalent payment method in the region. Countries, such as Kenya, Tanzania, and Ghana, are leading the way. There, mobile wallets are now commonplace for everyday transactions and payments, from utility payments through e-commerce to peer-to-peer money transfers. The emergence of super apps that bring together a suite of financial services will also be a factor in the evolution of the digital wallet ecosystem.
Neo-banks and digital banking innovations
Neo-banks are removing barriers and changing the face of financial services in Africa, especially among younger, more tech-savvy users. These digital-only banks are designed to provide a mobile-first banking experience for users, helping them save, borrow, or invest at the touch of a button from their smartphones.
With the regulatory framework adapting to support digital banking, PSPs can partner with neo-banks to offer integrated payment solutions that streamline the user journey and help them access a wider customer base.
Evolution of digital currency and crypto adoption
Central bank digital currencies (CBDCs) and cryptocurrencies are finding common ground in Africa. And other countries are following suit, with Nigeria taking the lead by introducing the e-Naira. As digital currencies become mainstream, PSP can leverage this trend by rolling out seamless cryptocurrency payment solutions, digital wallets for CBDCs, or safely and efficiently convert crypto to fiat.
Additionally, regulatory clarity around digital currencies will encourage more businesses and consumers to adopt crypto payments, continuing to propel innovation in the payments sector.
AI and ML integration
AI and ML are revolutionising digital payments through improved fraud detection, personalised customer experiences, and automated customer support. AI-powered chatbots are gaining popularity for customer communication, whereas predictive analytics enable PSPs to streamline payment flows and increase user engagement.
By adopting AI-driven technologies, PSPs can enhance operational efficiency, improve security and provide personalised financial solutions and products to cater to African consumers’ evolving needs.
More focus on cybersecurity and data privacy
As digital payments grow, so do cybersecurity risks. To protect sensitive payment data, PSPs need to implement strong security practices like multi-factor authentication, tokenisation, and end-to-end encryption.
Compliance with data protection regulations, modeled after GDPR, will play a crucial role in building customer trust and achieving regulatory compliance. PSPs that proactively invest in cybersecurity solutions and implement global security standards will gain a competitive advantage in the evolving digital payments landscape.
Conclusion
Africa’s digital payment ecosystem is on the cusp of a transformative journey, offering immense opportunities for agile, innovative, and customer-focused PSPs. By leveraging emerging trends and adopting a forward-looking approach, PSPs can drive financial inclusion and shape Africa’s payments future.
Sources:
(2) https://global.ptsecurity.com/analytics/africa-cybersecurity-threatscape-2022-2023
(3) https://www.statista.com/forecasts/1146636/internet-users-in-africa
