A wave of new investments and regulatory transformations reshapes financial interactions and digital payments in Africa. For Africa’s digital transition to proceed smoothly, a coherent environment that ensures investment and financing is still needed.

Accelerated transition to digital payments in Africa

Digital payments are a booming activity globally, attracting more funding than any other financial services sector. Over the past decade, the sector has also generated the most significant returns and growth. Digital payment operations in Africa generated about 24 billion USD in revenue in 2020, including domestic and cross-border payments. Local digital payments contributed approximately 15 billion USD.

However, only 5 to 7 % of all African financial transactions are conducted electronically or digitally. This indicates that digital payments in Africa offer significant growth opportunities, especially as the efficiency and scalability of payment systems improve and the corresponding infrastructure develops.

Diversified market growth among African countries

Digital payments in Africa are evolving exponentially. Several African countries have seen an increase in digital payments over the past two years. According to the Central Bank of Nigeria, mobile money transaction volumes in Nigeria more than doubled to about 800 million USD in 2020. Furthermore, data from South Africa suggest that digital transactions increased by nearly 40 % during the lockdowns of 2020 and 2021.

Experts predict that between 2020 and 2025, the electronic payments sector will grow by about 150%, reaching nearly 40 billion USD in revenue from domestic payments alone, or approximately 188 billion USD in transaction volumes.

However, growth will remain uneven across the continent. The growth rates of different markets will be determined by :

• The state of infrastructure readiness
• The extent of e-commerce
• The penetration of mobile money
• Regulations

Factors influencing the growth prospects of digital payments

Economic growth, favorable demographics, technological innovation, and developments in payment infrastructure shape the future of digital payments in Africa. However, the effect of new disruptions, including blockchain, cryptocurrencies, and open banking, remains more challenging to predict.

Young population and strong economic fundamentals

Young urban consumers and strong economic fundamentals have provided fertile ground for the growth of digital payments in Africa. Africa has the highest population growth rate in the world and the youngest median age, at 20 years.

By 2045, most young Africans will likely move to cities. In Africa, a young and urban population offers a ready market for digital payments. As a result, growth is already evident in how people travel (online booking services), consume entertainment (streaming services), and shop (e-commerce).

The fundamental indicators of economic growth and the declining cost of data continue to drive digital payments. According to the World Bank and the African Development Bank, Africa has over 650 million mobile phone subscribers.

Adoption and penetration of alternative payment methods

Technology has progressed at the pace of innovation. African consumers continue to benefit from the expansion of alternative payment options across the continent. Local and international financial and telecommunications companies are accelerating this penetration.

More than 2 billion USD in daily transactions have been processed, representing over 40 % of Africa’s GDP. International remittances processed using mobile money wallets have increased by 65 %. Digital wallets connected to various payment modes, such as cards, accounts, and mobile money, have also grown in usage and availability.

Interactions between consumers and merchants have also been facilitated by new innovative technologies. In Ghana, for instance, the Quick Response (GHQR) service accepts payments made by banks, mobile money, and cards. The NQR offers a comparable solution in Nigeria. Meanwhile, interoperability between competing mobile wallets has been achieved in most countries.