East to West: Payments in Africa
In my conversations with people from non-African countries, I'm typically met with surprise at how payments systems and behaviors differ from country to country in Africa.
Here I will attempt to explain the difference - from East to West. (Of course, North and Southern Africa also have very different payment systems but I will focus on East and West for brevity here.)
Mobile Money
Thanks to pioneers like Safaricom, mobile money is a very popular way to make payments in East African countries like Kenya. From small ticket transactions like buying eggs in a small store or paying for a taxi ride to much larger transactions, mobile money is almost second nature to internet savvy and the non-internet savvy alike. Approximately 96% of Kneyan households have a mobile money account. When you think payments here think mobile money and then cash before anything like a debit/credit cards or a bank account transfer.
Card or Cash?
In West African countries like Nigeria, it is not uncommon to be asked at the beginning of your Uber ride, "Are you paying by card or cash?"
If you have lived in East Africa for any length of time and arrived Nigeria expecting to find a mobile money payments system you would be sorely surprised. Right after cash, a popular way to pay for retail transactions is bank transfer. This is because the financial system infrastructure in Nigeria is extremely advanced with services like realtime/instant funds transfers from bank account to bank account (even if the payer and payee use different banks).
Compared to the premium paid for (near) instant transfers in the West, this service comes at a relatively low cost and is priced based on the value of the transfer (between NGN0 - NGN 50). You can also make POS payments if you are out to dinner in a restaurant or a supermarket for example. Tap to pay or swipe transactions popular in Europe won't work so keep your card PIN top of mind.
Outliers
West African countries like Ghana exist that are outliers. Ghana leads the world alongside Kenya in mobile money usage rates in the world. So coming to Ghana from Nigeria expecting pay via debit card or pay by bank transfer you might be met with a raised eyebrow. Cash and mobile money (via operators like MTN, AirtelTigo and Vodafone) are the most popular ways to pay for goods and services. There is also interoperability between banks and mobile money operators so it is possible to make transfers from a Ghanaian bank account to a mobile money wallet and vice versa.
The regulators
Finally on differences, given how different some of the countries I have highlighted are in terms of payment methods and customer behaviors, the regulators also have different licensing regimes, categories and requirements for new entrants. The Bank of Ghana has different expectations and licensing requirements for any fintech looking to play in the payments space, the same way the Central Bank of Kenya or the Central Bank of Nigeria do.
Cash is still king
Mastercard recently mentioned their biggest competitor in Africa is cash - not other card schemes. In all of this, from East to West, cash is still king. The covid pandemic accelerated digital payment adoption in many African countries, however ~90% retail transactions are cash-based.
If you have any questions about this article or payments in Africa in general, I'd love to chat! You can reach me at ibukun.akinnawo[at]gmail[dot]com