By Clara Wanjiku Odero

Markets in Africa are rapidly growing and consumer spending is projected to reach USD 2.1 trillion by 2025. In 2018, the World Bank reported an increase in remittances by 10% to USD 46 billion. According to the World Bank the remittance market in Africa totalled USD 48 billion in 2019. The Kenya Central Bank data saw an increase of 6.5% in August 2020 while in Zimbabwe remittance inflows increased by 33%. Several African central banks reduced fees and loosened limits on digital transactions, which encouraged the public to use digital services during the lockdown.

Africa was the final part of Nium’s expansion plan in truly becoming a global player. While Nium’s African expansion began with Ghana, Kenya, South Africa and Tanzania, in March 2021, the company is also looking to expand into other markets on the continent. The African continent has long been an untapped region with tremendous growth potential for fintech companies. Our expansion into the region represents an important milestone as we continue to drive global growth and partnerships.

Africa – The next big thing in B2B payments

The cost of remittances in Africa is highest in the world, standing at 9%. This is majorly due to the usage of cash which drives up the logistical cost. However, the reduced cash usage due to the pandemic, along with the success of digital payment platforms, provided B2B payments providers with an opportunity to tap into this market and ease cross-border transactions. Macro-economic factors have further led to the emergence of fintech companies in countries like Kenya, Ghana, Nigeria and South Africa.

Key drivers include:

Implementation of African Continental Free Trade Area (AfCFTA) and the Free movement protocol

The AfCFTA, signed in 2018, is changing the way business is conducted across the continent. AfCFTA aims to remove tariffs on goods, leading to the creation of a single market and deepening the economic integration of the continent. AfCFTA will also make it easier for investments and create healthy competition amongst businesses from the member states.

There is also a protocol of Free Movement of people in Africa, which encourages businesses to expand their operations across the continent. Both of these initiatives will require a robust and interoperable financial system, of which remittance structures are a key part. Financial institutions are now working closely with mobile operators and regulatory authorities to create a safe and secure infrastructure and maximise the potential of digital payments and decrease costs associated with cross-border payments.

Growing mobile user population

Africa has a very large mobile user population, which is growing five times faster than anywhere else in the world. This was instrumental to the acceleration of the continent’s economic growth in 2020. The number of mobile users is higher than bank account ownerships. This led to several banks and other financial institutes moving to a mobile-friendly approach for transactions, beneficial for Fintech companies like Nium.

Favourable support from the government

Government and Central banks are also playing an active role in the growth of online payments services in Africa. For instance, the Bank of Ghana established a new fintech and innovation office in May 2020 which aims to drive digitisation and oversee mobile money operators, payments service providers (PSPs), closed-loop payments products, payments support solutions and other emerging forms of payments delivered by non-bank entities. The office also looks to develop policies to promote fintech, innovation and interoperability in Ghana. The South Africa Reserve Bank, too, is establishing a new fintech innovation hub, in collaboration with other government agencies to provide a platform for experimentation and make more advancements in Fintech.

These government initiatives have encouraged payments solution providers like Nium to explore Africa. Also, as part of the anti-money laundering drive and to reduce the risk of terror funding, these governments are consciously embedding best-in-class security to ensure safe and transparent transactions. With a global network of compliance certifications, Nium will be able to provide a fully secure cross-border payments experience.

Free trade agreements and evolving financial infrastructure

Countries in Africa are part of one of the world’s largest free trade agreements which will make it essential in the future for businesses to have an online presence. These agreements will make it possible for digital remittance platforms such as Nium to streamline cross-border payments between African nations.

Financial market infrastructures (FMIs) such as the SADC-RTGS and others such as the East African Regional Payment System (EAPS) and the regional RTGS system launched by the Economic and Monetary Community of Central Africa (CEMAC) will ensure smoother transactions between regions. This will help Nium’s customers to be able to send money fast, safely and at a low cost.