How to improve payments interoperability in Africa

Sandra Yao recently spoke at the Inclusive Fintech Forum in Rwanda on real-world solutions for payments interoperability. She argues that while newer digital currencies and stablecoins have their place, improving the existing network for payments and digital wallets can rapidly escalate financial inclusion in Africa.

Fintech companies have brought Africa into a new digital age. Today, the continent accounts for 70% of the world’s mobile money transfers – a US$1 trillion market. Despite the popularity of digital payment solutions, the lack of interoperability between platforms, providers and countries hampers financial inclusion and economic efficiency in Africa’s payments landscape. 

This issue is particularly significant for cross-border payments, which are crucial to the region’s financial ecosystem. In 2022, remittances worth an estimated US$53 billion flowed into Sub-Saharan Africa, serving as a vital lifeline for households and contributing significantly to the GDP. However, poor interoperability leads to some of the world’s highest remittance fees (7.8% for $US200 in Q2 2002), negatively impacting many African economies.

Addressing the payments interoperability challenge

Establishing best practices and standards can reduce the barriers between different payment methods and facilitate faster, more affordable and transparent cross-border transactions.

These efforts were discussed at the Inclusive Fintech Forum in Kigali, Rwanda, on 21 June 2023. I joined expert panellists from Ripple, Swift, Circle and Mojaloop to acknowledge the complexity of developing seamless connectivity and market-specific solutions.

Are digital currencies the solution?

While newer digital currencies and stablecoins using Distributed Ledger Technologies offer advantages such as faster transactions and potentially lower costs, they can pose challenges for cross-border payments in Africa. I highlighted several concerns during the panel discussion:

• Monetary sovereignty: Bypassing the local currency with crypto or another fiat-backed currency, digital currencies can impact a country’s monetary sovereignty and central bank controls.  
• Lack of access and acceptance: Many consumers lack access to the technology and knowledge to transact using digital currencies. Similarly, many merchants and money transfer operators cannot accept digital currencies as payment.
• Challenging regulatory landscape: The regulatory landscape surrounding digital currencies is uncertain and evolving, leading to legal and compliance issues and impacting their availability, legality and reliability. 

Thunes’ pragmatic approach 

We have a practical approach to solving interoperability. Thunes uniquely leverages innovative cloud-based payment technology and its broad global network to bridge the gap between senders and receivers. This has been demonstrated through our successful expansion across Africa. Here, we operate in 35 countries with partnerships with all major mobile wallet operators and regional banks. The result is a real-time, interoperable real-time network with over 200 routes for cross-border payments just in Africa alone. Our infrastructure is low-cost, transparent and in use by millions of people today.

Payment system interoperability is crucial to advance financial inclusion in Africa. This can be accomplished best by unlocking the full potential of the fintech sector. We are actively addressing the challenges of interoperability by offering practical, real-world solutions and working in a collaborative approach alongside existing systems, regulatory bodies and partners to help ensure unbanked individuals can access financial services.

To learn more about Thunes’ solutions and financial inclusion, contact us today.