Policy, literacy key to Africa cashless economy growth

Africa has for a long time looked to galvanise its strengths and capabilities to build a stronger economy. It is well known the resources that the continent possesses, including its youthful population.

Economic independence and financial inclusion still remain challenges for the continent, preventing a uniform spread of wealth across different economic levels.

Currently, only individuals in stronger economic positions are able to take advantage of the financial solutions tasked with growing financial inclusion. In 2021, according to data from the African Development Bank (AfDB), there are 322 million unbanked individuals on the continent.

One of the revolutionary ideas of this millennium, mobile money, was born on the African continent. Thus far, this is one of the few solutions that has had success in providing all demographics access to financial services.

The impact of mobile money can be seen in the financial inclusion statistics of the continent. In contrast to the high number of unbanked individuals, Africa accounts for 64 percent of all mobile money transactions globally ($490 billion) as per the GSMA State of the Industry Report on Mobile Money 2021.

Further, mobile money agents greatly outnumber ATMs and bank branches. For every 100,000 people, there are 585 mobile money agents, nine ATMs and five bank branches.

This shows that despite the growth of digital payments on the continent, the greater majority of individuals are reliant on mobile money and cash.

Cash-based and mobile money transactions are the most accessible to the majority of the workforce driven by the fact that over 80 percent of workers in sub-Saharan Africa are in the informal sector.

But with the growth of technology and a population that is able to easily adapt to digital platforms, growing a cashless economy can have a major impact on the continent’s growth.

The first step Africa should take is to harmonise policies across the continent that boost the growth of a cashless economy since a continental impact will only be felt when successful policies are replicated across different countries and regions.

Innovation must lead for policy to follow and it can never be the other way around. For example, Kenya pioneered the development of mobile money with the creation of M-Pesa and continues to lead the continent when it comes to growing and developing the service. This has been aided by the creation of policies and legislation that have grown its use and allowed the service to thrive. If similar policies are created in other African countries, then mobile money will experience similar benefits across the continent.

Making it possible to access social services through multiple cashless services will provide incentive for customers to convert from the use of cash.

Ninety-five percent of transactions in Nigeria are still cash-based, showing that cash is still king on the continent. But there must be greater incentives besides security to convert more customers.

If service providers such as payment companies, banks and fintechs make it possible for individuals to pay for services such as insurance using cashless transactions, more individuals would be willing to do away with cash. Currently, in some countries, mobile money is the only alternative to cash for accessing these services.

Low literacy levels are a hinderance to a cashless economy. This poses a challenge because despite the pervasiveness of technology and high mobile phone penetration levels, there are great opportunities for fraud and crime.

Social engineering attacks are regularly used by criminals to steal from unwitting individuals. This can only be fought by extensive education by service providers on how to protect one’s accounts and finances. The use of Trusted Digital Identities (TDIs) and other authentication measures can also assist in protecting those who may not be able to benefit from the education by the service providers. TDIs will allow only the rightful owner to access their funds.

Authentication measures such as voice recognition shall also go a long way in this endeavour. There are some service providers that have already made attempts at this, such as Safaricom in Kenya which has the Jitambulishe Service that uses voice biometrics to provide access to your account. Other service providers such as fintechs like Pesakit and Semoa have already stated intentions to explore similar services.

It is therefore possible for Africa to use a cashless economy as one of the platforms to support its transformation into a strong economic block.

However, this will only be possible if governments, regulators, fintechs, banks and continental bodies such as the African Union take the appropriate steps to strengthen the foundations already in place.

If these strides are made continent-wide, the benefits shall be felt by individuals at all economic levels.

Claude is the CEO at Global Voice Group, a big data and regulatory technology developer