Seamless interoperability can boost financial access

Financial inclusion and the growth of the cashless economy are high up the agenda for Sub-Saharan Africa (SSA). Promoting interoperability can help bring down the cost of sending and receiving funds in the region which is currently the most expensive globally. This is as per information provided by the World Bank with data showing that from January to March 2020, people spent an average of 8.9 percent to send money to the region, much higher than the global average of 6.8percent.

Beyond just seamless interoperability, the improvement of the national payments gateway shall help to consolidate the efforts being made in this endeavour and include millions of Africans in the formal financial ecosystem.

The payments ecosystem is greatly fragmented, with users split between the banked and the unbanked. In sub-Saharan Africa, 57percent of the population lack any form of a bank account. However, the sweeping adoption of mobile money has helped to bridge this gap and financially include a large portion of the population.

The world today has also begun to appreciate the need for digitisation and the real-time movement of money with as few barriers as possible. Solving the interoperability issue will move SSA closer to unifying the ecosystem and allowing for the integration of multiple online payments systems and closing avenues for fraud linked to ghost payments, pension fraud and misappropriation of funds.

For the systems to work, they must be developed to meet the needs of the end-user and therefore make it easy for people to access transaction accounts and payment services. For example at Global Voice Group (GVG), we see interoperability as the key to making digital payments more secure, convenient and cheaper.

Technological solutions such as Transfin encompass key capabilities to help achieve these goals due to the management and monitoring functionalities it is equipped with. The solution provides the facilities needed to execute a high number of transactions between different platforms while providing high operational efficiency in payment clearing, settlement and oversight.

This is achieved by digitising and streamlining payroll systems and promoting a safer, highly efficient and inclusive payment ecosystem that can disburse payments to both the banked and unbanked.

For governments and central banks, real-time payments provide a means to migrate from an informal cash economy to a more vibrant and secure digital payments ecosystem that can be better managed for the benefit of citizens. The digital economy has grown in leaps and bounds with the adoption of mobile money - 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.

With 80percent of workers in sub-Saharan Africa earning through the informal sector, financial inclusion is high up the agenda of many governments. Sub-Saharan Africa has also seen a consistent rise in financial inclusion funding, receiving more funding than any other region for the first time in 2019 – with $7.8 billion in active commitments, according to the 2019 CGAP Funder Survey.

One of the biggest addressable markets is in the instance of governments making and receiving payments. Real-time payments are instant and irrevocable, which makes them suitable for displacing cash in these scenarios by promoting accountability. This can be realised by adopting technologies that can disburse payments via multiple channels, especially those that are most convenient for both parties and eliminate fraud by making payments traceable.

A 2019 report by Deloitte and Vocalink showed how real-time payments can boost working capital and improve the efficiency of the financial system with long-term impact as corporates, startups and policy-makers harness the infrastructure to deliver innovative products and services to consumers and businesses. The mix of benefits may differ from country to country, but the overall economic implications are powerful and convincing.

With the adoption of technologies that encompass the needs of the payments ecosystem, as well as the beneficiaries of the payments, the digital economy will continue to grow. This will be further buoyed by the drive towards achieving seamless interoperability and the expansion of national payment gateways to foster accountability. Financial inclusion will receive a big boost on the African continent if these targets are achieved.