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ZAMBIA THE DIGITAL LEAP-FROGGER

by with No Comment FinTech

Author:  Aston Njovu

Co-Founder | Product Manager – Zeepay Zambia

Do you remember the last time you walked to a shop in search of an airtime scratch card? The time you visited the post office to send money to a relative in the next town.

Today, I cannot remember the last time I saw an airtime recharge card. Thanks to great innovation and agility in technology as I now conveniently recharge airtime through my mobile wallet.  Convenience has further been introduced as one can globally transfer money from the comfort of their living room through a mobile device. Impressive right?

It is exciting and fills my heart with pride when I realize how Mother Zambia has witnessed immense transformation in the digital financial sector (DFS), leapfrogging herself as a frontier among the major players in the global digital sprint.

To assist you appreciate this insight. In 2009, 60.3% of adults did not have access to cell phones and a further study by the Zambia Information and Communication Authority (ZICTA) revealed that over 86% of Zambian adults did not have bank accounts then. No one could talk about mobile money except when referencing the Kenyan M-Pesa. Today our tele-density stands at over 100%. I can safely say Mr. Mwewa Chitambala’s prophecy in the Zamtel advert of circa 22 years ago is now fulfilled, “I have a dream, that one day everyone will own a cell phone”.

What factors contributed to this amazing leap? You may ask.

The leap is a function of several factors among others: investment in infrastructure (Base stations), availability of devices (Mobile phones), Agility of platforms as well as interoperability which is highly advocated and driven by the Bank of Zambia.

The above functions coupled with immense iteration have propelled growth in the digital financial ecosystem. Zambia has experienced increased financial inclusion over a decade and half. Financial inclusion is the measure of how accessible and affordable financial products and services are to individuals and business. Today 69.4% of adults are financially included as compared to 37.3% in 2009.

Disruption began in the early 2000 when Zambia Postal Services Corporation launched Swift cash (Now called Zampost Money). I remember walking to Livingstone Post office every new school term to collect my school fees then walk down to my David Livingstone High school. One could only access the swift cash by visiting a Post office branch (This is called a cash pick-up in the fintech space).

The Zampost innovation was disrupted in 2009 when ZOONA set precedence in convenient mobile financial services as they flooded the market with over 1,600 agent points across the country and processed over $1 billion by 2016. As agility and iteration is the backbone of disruption, ZOONA was struck in 2011 when the likes of MTN and Airtel launched their mobile money wallets with Zamtel joining the bandwagon later in 2017. The Mobile Network Operators (MNO’s) had an edge as they could easily create mobile wallets for their GSMA subscribers. This was a huge feat, as it meant customers could perform online (same network) Person to Person (P2P) transfers without going to an agent.  

In as much as P2P transactions were exciting, the ecosystem had huge gaps to fill. Several sidelined use cases became more apparent. The ecosystem realized customers sought transfer of fund across networks, Person to Business (P2B), Business to Business (B2B), Person to Government (P2G) utility bill payment among others.

The need for agile, easily accessible and interoperable platforms was instrumental in birthing fintech’s, the likes of Zeepay Zambia and aggregators such as Kazang. Zeepay enables subscribers to create a Zeepay mobile wallet in less than five minutes regardless of their network provider (MTN, Airtel or ZAMTEL). Customers can instantly receive money from abroad including redeeming MoneyGram cash pick-up 24/7 from the comfort of their home without going to the bank or agents. Zeepay is the first fintech in Zambia enabling customers to send money to over 200 countries from their mobile phone. Others, use cases include utility bill payment, cash in and cash out, transfer to MTN, Airtel, Zamtel and banks, Netflix and amazon tokens.     

This kind of disruption further drove the need to interoperate diverse Payment Service Provider (PSP) platforms. The Bank of Zambia and stakeholders introduced the National Financial Switch (NFS) managed by the Zambia Electronic Clearing House (ZECHL). The NFS is a centralized network infrastructure connecting banks and financial institutions while facilitating seamless electronic payments and interbank transactions. The network allows participating players to integrate once off, enabling customers to transfer funds from one wallet to any bank account and from bank to any mobile wallet. The interoperability has increased digital financial services patronage leading to values of 451 billion Zambia Kwacha being transacted via mobile payments in 2023.

Digital financial service providers are further propelling growth and making life easy while simultaneously addressing the United Nation’s Sustainable Development Goals.  

It is safe to say that Zambia is a leapfrogged!

Two African women in a market paying with cash

IS CASH STILL KING IN ZAMBIA?

by with No Comment FinTech

Author: Mark Chirwa

Assistant Research and Projects Officer @PAYZ

Within the Digital Financial Services (DFS) space, there seems to be a unanimous agreement among digital payment experts that a well-structured financial ecosystem optimizes the use of banking and payments products and services. By enhancing financial inclusion and digital transactions, countries can reduce the use of cash and thereby benefit from the increased safety, efficiency, and transparency of a cashless economy. Yet there are several forces working against digitalization.

Zambia has bolstered its banking and payments industry over the last few years to increase and improve services for its almost close to 20 million population. These improvements have accelerated largely by the adoption of DFS, especially mobile money as a preferred payment method. The Bank of Zambia, the country’s central bank, working together with financial institutions and other stakeholders, has spearheaded initiatives for the country’s payments landscape in promoting financial inclusion and encourage the use of digital financial services. The initiatives have led to increased product offerings within the country and the number of entities offering various digital financial services.

The prevalence of mobile money payments for example, has surged by over 8,116% in the last six years with the number of active mobile wallets almost hitting 13 million in 2023 with a transaction value of K452 billion relative to only 11 million active wallets in 2022 with a value of K295.8 billion. Zambia’s 39,159 Point of Sales (POS) terminals as at end of 2022 captured over 60,000,000 transactions in 2022, a substantial figure which is also attributed to the increase in DFS use.

Nevertheless, cash continues to reign supreme in Zambia, especially in most rural areas where most of the population is underserved and unbanked. The latest survey on Micro, Small and Medium Enterprises (MSMEs) show that 95.6% of these businesses is still informalized, this is consistent with the country’s labor force report which shows that 76.3 % of the labor force is operating in the informal sector (labor force survey 2022). This highlights the persistent use of cash within informal businesses.

Despite digital payments being available for both customers and merchants, there remains a strong affinity for cash. Why?

Here are five key elements that may be influencing the prevalence of cash in Zambia:

  1. The Weight of Cash Culture: Cash holds considerable cultural significance in Africa, including Zambia, where people associate it with a sense of assurance and guarantee that other payment instruments may not provide.
  2. A persistent Informal Economy: Despite dynamic actions taken by the Government to bring small and medium enterprises (SMEs) into the formal economy, Zambia’s 95.6% informality rate remains high. These merchants prioritize cash transactions over digital channels which may be due to a lack of motivation to enhance transparency in their businesses.
  3. Limited access to digital infrastructure and Network coverage: Despite an increasing rate of mobile phone ownership, not all corners of the country have access to quality mobile network coverage which forms the bedrock for the usage of DFS.
  4. Low levels of Digital Skills and Literacy: Many smartphone users lack the proficiency to conduct end-to-end payment transactions efficiently. Many people are not familiar with or understand the benefits of using digital financial services. There is still room to enhance the level of digital capabilities of the vulnerable segments.
  5. Increase in levels of frauds and scams: The increase in levels of scams and frauds on DFS has sparked a certain level of fear, this has contributed to the erosion of trust in the adoption and usage of DFS. 

 

Addressing the appetite for cash and promoting digital payments in Zambia will need to overcome these elements through the following recommendations:

  • Digital Education Campaigns and Sensitization programmes: Launch campaigns to educate both retailers and end-users, particularly those in the informal economy, about mobile phone usage and digital payment transactions. An example of this is the “Go Cashless campaign” by the Central bank.
  • Promote Digital Payments in the Informal Economy: Establish and promote government incentives to encourage players in the informal economy to formalize their businesses.
  • Incentivize payments through digital channels: Develop incentives for customers that enhance their experience (cashback or discount promotions, loyalty programs, etc.) to compete with cash payments.

 

Through continued partnerships and collaborations, the adoption of and implementation of some of these recommendations by players may contribute to strengthening the payment ecosystem not only in Zambia but other regions may follow suite. In Cape Verde for example, enabling a digital payment landscape is helping to promote the government’s strategic focus on tourism as it expands its economy.

Compliance and regulation concept. Enforcement of laws, regulations, and standards, requirements, internal policies and procedures. Minimize legal and financial risks, protect corporate reputation.

How Regulation mitigates risks and how they fit in the Collaborative DFS Regulatory framework

by with No Comment FinTech

Author: Greyford C Mwase

Project Lead at Payments Association of Zambia

It goes without a shred of doubt that collaboration serves as a tool for driving financial inclusion globally, and multisectoral initiatives bridge the chasm in underserved areas. This is not void of risks, this is why regulation exists to play a significant role in mitigating risks in various industries, including the financial sector, in the context of Collaborative Digital Financial Services (DFS) and its regulatory framework, several aspects contribute to risk mitigation including the following:

A. Risk Management Requirements

Collaborative DFS providers can enhance their ability to identify and mitigate potential risks by complying with standards including identification and assessment of risks such as operational, cybersecurity, and credit risks. The regulation requires financial institutions to put in place resilient practices as far as risk management is concerned.

B. Compliance Standards

Regulations establish the standards of compliance to which financial institutions must adhere, and the standards often include guidelines for risk management practices, data security, customer protection, and operational procedures. This fits in the collaborative DFS regulatory framework in that although regulation is not the starting point of collaboration, it is foundational in providing controls, best practices, and general Jurisprudence of DFS collaboration.

C. Consumer Protection

Regulatory frameworks often include measures to protect consumers. This may involve setting clear guidelines on disclosure of terms and conditions, ensuring fair and transparent pricing, and safeguarding customer data. This protection helps build trust in collaborative DFS platforms and reduce the risk of harm to consumers.

These, and more, guarantee foresight and oversight in safeguarding the complex nature of DFS collaborations.

Photo of woman buying rolled up carpet from small business owner

The role of consumer protection in the digital economy part 2

by with No Comment FinTech

Source: UNCDF

Part 2. Challenges and Opportunities of the Digital Economy

The rise of the digital economy has raised unique consumer protection issues and opportunities. The availability of e-commerce and other digital transactions offers consumers a wider range of choices in potentially global markets. With more choices at their fingertips, in theory consumers can more easily and efficiently compare prices and terms, enhancing their bargaining power. While these factors may alleviate some traditional concerns of consumer protection, they exacerbate others and raise new ones.

For example, in online purchases, consumers may have limited knowledge about the provider, including where it is located, its reputation for quality or fairness, its responsiveness to complaints or even whether it is who it purports to be. They may not have an opportunity to inspect products to ensure they are safe, effective and high-quality. This can create significant information asymmetries between the providers and the consumers making online purchases.

Moreover, the nature of digital payments and collection of personal data also raises new issues about data security, the potential for fraud and violations of privacy. Recent research shows that 17% of online shoppers who abandon their online cart prior to completing their purchase cited a lack of trust in providing payment information to the provider. Providers can attempt to mitigate this distrust by assuring consumers through the use of measures such as recognized security certifications or trust badges and partnerships with reputable online payment system providers. However, these measures may require significant investments that some smaller providers cannot afford.

How consumer protection supports the digital economy

In order for a digital economy to flourish, consumers need to have trust in the integrity and fairness of digital markets. Effective consumer protection laws and procedures can engender such trust, giving consumers the confidence to engage and transact. These aim to address the asymmetries, consumer irrationalities and other barriers to optimal consumer choice. They typically involve the application of rules, principles and procedures to impose obligations of fairness, accountability and transparency (sometimes referred to as FAT) on providers and grant consumers certain rights consistent with these values. While approaches vary across jurisdictions, a cluster of six core principles particularly applicable to the digital economy can be distilled.

Fair practices

Consumers may be vulnerable to deception where online transactions do not allow the opportunity to properly evaluate goods, services or the provider before making the purchase. For example, a consumer purchasing clothing online will not be able to verify the quality of the fabric or the fit or assess whether the branding is authentic. Online product reviews by other consumers are a potential means of increasing pre-purchase transparency. A 2016 study showed that 82% of adults read such reviews before making an online purchase. However, such reviews may not be reliable and fraudulent reviews are becoming increasingly prevalent, for example with businesses artificially increasing their ratings or artificially lowering competitors’ ratings through fake reviews.

Consumer protection frameworks typically require providers to adopt fair business practices through the entire lifecycle of consumer transactions, from promotional and advertising materials through the terms and conditions attached to a purchase. This includes prohibiting any deceptive, fraudulent or unfair representations and ensuring that products are genuine, the quality is accurately depicted, pricing is clear and not presented in a misleading manner, any online reviews or endorsements are authentic, and the provider accurately discloses its identity and qualifications.

Side view of young black woman giving bag to customer over counter while working in clothing store, copy space

The role of consumer protection in the digital economy

by with No Comment FinTech

Source: UNCDF

Part 1. Why we need consumer protection.

Providers of goods and services often have greater knowledge, power or resources than consumers. Providers may leverage this to dictate the terms of use of their products to their advantage and the consumer’s disadvantage. This is particularly accentuated in the absence of effective competition, when consumers have few or no alternatives to the product or services that are being offered. Conversely, robust competition can incentivize providers to hide the true cost of goods and services in an effort to gain a competitive advantage.

In addition, consumers may face limitations on their ability to make rational, self-interested decisions. In the context of digital financial services, for example, consumers might not fully understand how a financial product works or the consequences that may follow if they are unable to comply with the terms in full. Consumers may also make poor choices due to their vulnerabilities, such as psychological biases or their position (and decision-making autonomy) in their respective households, and these can be exploited by providers. Consumers might run up debt due to a “present bias² towards immediate gratification, or they may take out a payday loan without considering the difficulty of repaying due to a “projection bias.” In recent years, it became apparent that consumers were borrowing extensive digital credit in South Africa, Kenya and Nigeria to spend on sports betting. By 2020, more than a quarter of the consumers reported on by Kenya’s credit reference bureaus had been blacklisted for defaults on loans.

Similarly, a consumer biased about her or his insurance needs (either being over- or under-confident), especially among populations with low financial literacy levels, may end up under- or over-insured and even sometimes be deprived of access to healthcare due to unexpected high costs. Factors pertaining to the insurance providers may also adversely impact consumers. For example, opaque terms and conditions in an insurance contract can leave users unexpectedly unprotected or inadequate prudential requirements can lead to provider insolvency without customer recourse.

Women often feel sidelined and discriminated against by formal financial institutions, which – when coupled with lower financial literacy – can create mistrust that can prevent women from accessing and using different services. In addition, recent research has found that gendered differences in risk perceptions can explain women’s preferences for different types of financial products and that a key determinant of adoption of certain services is trust in financial institutions, which is often lower among women compared to men.

Consumer protection policy seeks to mitigate these factors that impede consumer choice and provide protections for vulnerable consumers.

Relationship to competition policy

The risks to consumers are even higher where there is a lack of competition, and especially in monopolistic markets. In an efficient free market, competition among providers should enable consumers to purchase goods and services at the lowest prices and on the most optimal terms. Competition policy focuses primarily on the supply side of the market, aiming to maximize the range of choices available by optimizing the functioning of markets. Using the same insurance example above, competition policy would focus on how competitive the insurance market is, whether there are any monopolistic tendencies, and whether competitors engage in any anti-competitive behaviour such as collusion, price-fixing and predatory pricing.

Consumer protection policy and competition policy are complementary in striving for the proper functioning of markets and promotion of consumer welfare. Consumer protection addresses dysfunctions on the demand side of the market, aiming to ensure that consumers can exercise their choices effectively, confidently and under fair conditions, and in some cases requiring minimum common standards. In the case of insurance, for example, consumer protection will seek to empower consumers with better information about different insurance offerings so that they understand coverage under each plan, can compare costs and benefits, and can assess the solvency of different providers.

Barriers to optimal consumer choice

Barriers to optimal consumer choice include information and bargaining power asymmetries between consumers and providers that are exacerbated by certain characteristics of human psychology.

Information asymmetries manifest when a provider has greater knowledge and understanding of the specific goods or services or the nature of the market than a consumer and the average consumer cannot invest the time necessary to build countervailing expertise. For example, when borrowing money, consumers may struggle to calculate the true cost of a flat interest vs. declining balance interest loan. Similarly, when deciding which forex bureau to use, consumers may find it difficult to compare the relative cost of two remittance services with different fees and forex rates.

Information asymmetries can also operate in reverse. For example, if providers have insufficient knowledge of a consumer’s ability and willingness to repay a loan, they may exclude certain individuals or groups from access to credit or offer them credit at a much higher cost. A study of microfinance institutions in South Africa found that expanding credit to marginal borrowers increased women’s access relatively more than that of men. This has important implications because women are often less likely than men to be able to borrow from formal sources. Global evidence also demonstrates that private-sector lending increases in countries with better information-sharing and that small and medium enterprises (SMEs) have fewer financial constraints in countries where credit bureaus have been established.

Differences in economic scale can also lead to asymmetries in bargaining power. In many transactions, the consumer has no choice but to agree to one-sided terms and conditions in order to access goods or services. For example, the terms of a life insurance policy or a license to use cloud software are typically non-negotiable. However, with more choices at their fingertips, in theory consumers can more easily and efficiently compare prices and terms, enhancing their bargaining power. Indeed, standardized products intentionally avoid the transaction costs of individual negotiations.

These asymmetries can be further compounded by the effects of human psychology. The field of behavioural economics has found that consumers may be subject to bounded rationality, where flawed memories or limited computational skills can result in bad decisions. Individuals also tend to rely on heuristics or “rules of thumb” when facing complex decisions, or where salient information is obscured in some way. Consumers may also be limited by bounded willpower, choosing to take actions that are attractive in the moment but contrary to their long-term interests. Unscrupulous providers may use these psychological effects to exploit consumers.

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State Of Instant And Inclusive Payment Systems In Africa Report 2023

by with No Comment FinTech

Source: Cenfri

Real-time retail payments that enable consumers to send and receive cross-border and domestic transactions digitally have been on the rise globally. The increasing proliferation of QR codes, apps, tap-and-go card technology, and small-value payments using proxy identifiers (aliases) such as phone numbers and email addresses have made payments one of the more innovative financial services in recent years. This is also evident in the number of deals that payments startups and established fintechs (paytechs) have been able to close.

In Africa, the progress and extent of reach in the market of digital payments is less documented than in other regions in the world, yet is unique in the scale of transactions that are routed via USSD channels. USSD technology enables the end-user to pay and receive money through mobile money wallets, even if only a basic feature phone is at hand. These nuances and the progress of digital payments on the continent, enabled by efficient and open underlying payments infrastructure, are analysed and captured in the second edition of the State of Instant and Inclusive Payment Systems (SIIPS) 2023 report produced by AfricaNenda in partnership with the World Bank and the United Nations Economic Commission for Africa (UNECA). Apart from the analysis of the major trends and barriers in the instant payment systems on the continent, the report presents case studies on Zambia’s National Financial Switch (NFS), Malawi National Switch (NATSWITCH) and other SADC region countries, highlighting the design journey of an instant payment system. End-user research with individual users and small businesses in the focus countries further paints the adoption and usage journey in the different realities of these markets.

Download the report and case studies and other key takeaways here: State of Instant and Inclusive Payment Systems (SIIPS) 2023 or explore the AfricaNenda website here: AfricaNenda

Young African Man Mobile banking on-the-go with smartphone, Portrait of Ghanaian man holding cellphone

FINANCIAL INCLUSION: A CATALYST FOR GLOBAL PROGRESS

by with No Comment FinTech

Author:

Tom Penyani Phiri: MBA GEN | AZM | BBA

Operations Manager - Zamtel Mobile Money

Tom.phiri@zamtel.co.zm | penyanipenyani@gmail.com

In an era marked by unprecedented technological advancements and interconnected global economies, the concept of financial inclusion has emerged as a pivotal force shaping societal, economic, and individual well-being. Financial inclusion refers to the accessibility and affordability of financial services for all individuals, regardless of their economic status. In the contemporary landscape, understanding and championing financial inclusion have become imperative for fostering economic growth, reducing inequality, and unlocking the full potential of individuals and communities.

THE MULTIFACETED IMPACT OF FINANCIAL INCLUSION:

EMPOWERING INDIVIDUALS: Financial inclusion is, at its core, a tool for empowerment. When individuals, irrespective of their economic standing, have access to basic financial services such as banking, savings, and credit, they gain the autonomy to manage their finances effectively. This empowerment serves as a catalyst for breaking the cycle of poverty and igniting a sense of self-determination among individuals.

FOSTERING ECONOMIC GROWTH:

The impact of financial inclusion on economic growth is profound. A society where all members can actively participate in financial activities contributes to a more dynamic and resilient economy. Small and medium-sized enterprises (SMEs), often the engines of economic growth, benefit significantly from financial inclusion as they gain access to the capital needed for innovation, expansion, and job creation.

REDUCING INCOME INEQUALITY:

One of the most compelling arguments for the importance of financial inclusion is its role in mitigating income inequality. By providing marginalized and underserved populations with access to financial services, a more equitable distribution of wealth becomes achievable. Financially inclusive practices create opportunities for individuals to accumulate assets, build credit histories, and participate more equitably in economic opportunities.

ENHANCING RESILIENCE TO SHOCKS:

Financially inclusive individuals and communities are better equipped to weather economic shocks and crises. Savings and insurance services act as crucial safety nets during times of hardship. For example, farmers with access to insurance are better protected against crop failures, and families with savings can navigate unexpected health emergencies with greater resilience.

ENCOURAGING ENTREPRENEURSHIP:

Access to credit is the lifeblood of entrepreneurship. Financial inclusion stimulates entrepreneurship by providing aspiring business owners with the capital necessary to start or expand their ventures. This not only leads to job creation but also contributes to economic diversification and increased productivity.

BOOSTING DIGITALIZATION AND INNOVATION:

In the age of digital transformation, financial inclusion and technological innovation are intertwined. The integration of technology, including mobile banking and digital wallets, not only enhances access to financial services but also fosters innovation in the financial sector. This, in turn, spurs economic development and facilitates more inclusive financial systems.

ENABLING SUSTAINABLE DEVELOPMENT GOALS (SDGS):

Financial inclusion serves as a linchpin for achieving various Sustainable Development Goals (SDGs) set by the United Nations. From eradicating poverty to promoting gender equality and ensuring good health and well-being, financial inclusion acts as a cross-cutting enabler that amplifies the impact of efforts to address global challenges.

PROMOTING SOCIAL INCLUSION AND GENDER EQUALITY:

Financial inclusion is intricately linked with social inclusion and gender equality. By ensuring that traditionally marginalized and vulnerable groups, including women, have access to financial services, societies become more inclusive. This empowerment fosters economic independence and contributes to breaking down traditional barriers.

FACILITATING GOVERNMENT AND AID DISTRIBUTION:

Financial inclusion facilitates more efficient government disbursements and aid distribution. Digital payment systems enable governments to reach citizens directly, reducing leakage and ensuring that financial support reaches its intended recipients promptly. This efficiency is particularly crucial in times of crises or emergencies.

MEETING THE NEEDS OF THE UNBANKED AND UNDERBANKED:

Despite significant progress, a considerable portion of the global population remains unbanked or underbanked. Financial inclusion matters today because it addresses the specific needs of these individuals, integrating them into the formal financial system and unlocking their economic potential.

THE GLOBAL CONTEXT:

Understanding the significance of financial inclusion becomes even more critical when viewed within the broader global context. As economies become increasingly interconnected, the ramifications of financial exclusion extend beyond national borders. For instance, the lack of financial inclusion can impede economic development in developing countries, creating a ripple effect that resonates globally.

In the current landscape, where technology facilitates instant communication and financial transactions, the exclusion of any group from the financial ecosystem can hinder the achievement of global economic goals. Moreover, the interconnectedness of financial systems necessitates collaborative efforts to ensure that financial inclusion becomes a global priority.

CHALLENGES AND OPPORTUNITIES:

While the benefits of financial inclusion are undeniable, addressing the challenges to its realization is equally essential. Barriers such as lack of infrastructure, regulatory hurdles, and cultural considerations pose challenges to achieving widespread financial inclusion. However, these challenges also present opportunities for innovative solutions, collaborative partnerships, and policy reforms that can pave the way for a more inclusive financial landscape.

Government initiatives, private-sector innovation, and international cooperation are key components in overcoming these challenges. Policymakers must implement regulatory frameworks that foster financial inclusion, financial institutions need to develop products tailored to the needs of underserved populations, and technology providers must continue to create solutions that bridge the gap between the banked and unbanked.

To my finality, the imperative of understanding and championing financial inclusion today cannot be overstated. The multifaceted impact of financial inclusion on individuals, communities, and economies highlights its role as a transformative force for societal progress. Empowering individuals, fostering economic growth, reducing inequality, and enabling global development are among the myriad benefits that financial inclusion brings.

As we navigate an era of unprecedented global challenges and opportunities, financial inclusion emerges as a powerful tool for building resilient, inclusive, and sustainable societies. By recognizing the importance of financial inclusion and actively working towards its realization, we contribute to a world where everyone has the opportunity to participate in and benefit from the global economy. In embracing financial inclusion, we unlock the potential for a future marked by prosperity, equality, and shared progress.

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Andrew Barden and Zekarias Amsalu: A conversation with the minds behind the Africa Fintech Summit

by with No Comment FinTech

Source: Techcabal

Noel K. Tshiani is the founder of Congo Business Network, which has partnered with the Africa Fintech Summit (AFTS) since April 2019 to mobilise startups and government officials from the Democratic Republic of Congo to participate in various editions of the summit held in Washington, Addis Ababa, Cairo, and Cape Town. He discusses the evolution of the summit from its inception to the upcoming November edition in Lusaka, Zambia, with Andrew Barden, lead organiser, and Zekarias Amsalu, co-founder of the event.

  1. Since its inception in 2017, the Africa Fintech Summit (AFTS) has grown into a key fintech event, not just in Africa, but globally. Can you share with me the initial vision behind the AFTS, and how it has evolved over the past editions, leading to the upcoming 10th edition in Lusaka, Zambia?

Andrew Barden: The original vision, which remains our vision today, is that Africa is uniquely positioned to be a global leader in the financial technology industry, that much work remains to be done, and that fintech can transform people’s lives and economies through the power of meaningful financial inclusion and enhanced sustainable development.

We take great care in organising each summit because we are uniquely positioned to be a catalyst for enabling investment, building balanced regulation, and facilitating collaboration across sectors and geographies. Over the years, AFTS has become the top stage for industry stakeholders to explore, debate, and connect around this shared vision for African fintech.

The AFTS has supported millions in capital raise efforts and has been instrumental in shaping policy guidelines and startup ecosystems. From your perspective, what are some of the most transformational impacts the summit has had, especially concerning the African fintech landscape?

AB: That is a spectacular question. Personally, I have always been fascinated by the entrepreneurial process. One of the programmes we have run since day one is our AlphaExpo Micro-Accelerator. This non-equity programme has enabled many startups across the continent to not only raise their public profile, but also to connect with potential investors and like-minded individuals.

Some people have told me, “Africa has too many fintechs.” I do not agree with that thinking. I believe that as a pan-African ecosystem, we need to do everything we can to remove the barriers to entry that prevent entrepreneurs from taking the step from idea to execution.

The summit is known for its cross-sectoral collaborations involving investors, entrepreneurs, and regulators. How do you manage to bring such diverse stakeholders under one roof, and what has been the secret sauce in fostering successful partnerships and new business ventures?

AB: The short answer is a lot of phone calls, emails, and letters. Getting the right decision makers in the room is the result of years of building relationships across industries and geographies. At AFTS, we pride ourselves on not being a “pay-to-play” event; it is important to us that this diverse and dynamic industry is well represented at each edition. The secret sauce for us is our thought-leadership-first approach and our focus on keeping the majority of our audience at the C-suite and director level. These two things work together to allow for the organic discovery and conversation necessary for efficient dealmaking and relationship building.

Given the variety of participants at the summit, from seasoned investors to budding fintech entrepreneurs, how do you ensure that there is a shared vision and synergy among attendees? What strategies have proven effective in aligning the interests of these diverse groups towards common goals?

AB: Of course, everyone will have their own opinions and insights, but when it comes to the macro vision of Africa’s fintech industry as a means to drive meaningful financial inclusion and sustainable economic development, I have not met many people in our industry who disagree with that vision. However, when it comes to the specifics of how that vision can be realised, that is where people start to disagree.

One of the benefits of being a sector-specific event is that AFTS attracts an audience that is already heavily focused on the fintech sector. With a wide net of different stakeholders attending AFTS, it is special to listen to many of the conversations on and off stage, because, while people may share a macro vision for African fintech, the different perspectives often help open people’s eyes to much more than their “focus area”. For me, it is less about aligning everyone’s vision and more about facilitating a conversation about a vision that is both geographically diverse and inclusive of different stakeholders.

Last year, in collaboration with Congo Business Network, AFTS organised a panel in French at the 8th edition in Cape Town, South Africa. This year, you have renewed this partnership for the panel titled: “Fintechs and the future of financial inclusion in francophone Africa”. Why is it essential to emphasise the French-speaking region in Africa, and what unique opportunities and challenges does francophone Africa present in the fintech business?

AB: There has been a divide that has cut off much of francophone Africa from participating in the conversations around financial technology in Africa. For me, it is important that we emphasise that Africa is not a monolith but rather a mosaic of cultures, languages, and more. I would say that not only is it important to highlight the francophone part of the continent, but it is also paramount that we facilitate the pan-African community to come together in a meaningful way. If you have ever been to an African Union meeting, there are many languages being spoken and translated at the same time. I see no reason why the private sector cannot do the same.

As we look towards the 10th edition of the AFTS in Lusaka, Zambia, what should attendees expect in terms of content, innovation showcases, and opportunities? Further, as a co-founder, can you share some insights on the future trajectory of AFTS, especially in light of the rapid developments in African fintech?

Zekarias Amsalu: We have a lot planned for the Lusaka edition and have been working closely with many spectacular stakeholders, including Zambia’s Ministry of Science and Technology as well as the Payments Association of Zambia. Planning for the Lusaka edition is on track to welcome over 700 delegates from over 60 countries around the world and will cover topics such as fintech’s involvement in artificial intelligence, cross-border trade, infrastructure development, climate adaptation, and much more. While in Lusaka, we will look forward to announcing next year’s summit, and we will actively be working to foster greater collaboration across industries and geographies.

As the co-founder of AFTS, can you recount the inspiration behind launching this platform, and how do you perceive its growth and evolution leading up to the upcoming 10th edition in Lusaka, Zambia?

ZA: Organically, since 2017, AFTS has grown to become a world-leading platform for Africa’s fintech stakeholders. When we started, fintech in Africa was a much smaller industry, but we recognized the need for collaboration between stakeholders and the encouragement of entrepreneurship. Over the years, we have had the pleasure of bringing several major investors and corporations to the continent for the first time.

The AFTS is not just a conference, but an ecosystem-building initiative. Could you delve into the importance of creating such an ecosystem in Africa, and how initiatives like workshops, pitch competitions, and ecosystem tours contribute to the growth and dynamism of the fintech sector?

ZA: “Ecosystem” is a word that is overused in the startup world, but we like to think of it as a community. How can we better strengthen the community of fintech professionals in Africa? Anyone can connect with anyone else, but if you do not take the time and effort to build meaningful connections, it becomes much harder to operate in the industry. Much of our industry is built on partnerships, and that cannot happen without community building. We see our initiatives, especially our ecosystem tour, as a way to strengthen this fintech community and propel it into the future.

The dual nature of AFTS, taking place in Washington, DC and rotating among African cities, seems strategic. How do you believe this bi-geographical approach has impacted the discourse on African fintech, especially when juxtaposed with global events like the spring meetings of the World Bank Group and the International Monetary Fund?

ZA: This bi-geographic approach and our model of choosing a new host city each November does not make our job any easier. While it would undoubtedly be simpler to replicate the summit in a fixed location each year, as is common with many other events, our team at AFTS is committed to constantly exploring new markets to broaden the impact of our message. Hosting the summit in Washington, DC during the spring meetings of the World Bank and the International Monetary Fund has played an important role in not only bringing the diaspora to the table, but also in building credibility for Africa’s technology sector.

For example, a New York City-based investor who has never done business in Africa may not be willing to fly to the continent to learn and see for themselves, but if they see an event focused on African fintech just a short train ride away from Washington, that alone helps remove the barrier to entry. Several investors have come to the summit in Washington specifically to “explore” what is going on. After the summit, they emailed us asking when the next one was on the continent.

With an impressive track record of supporting millions in capital raise efforts and significantly aiding market entry and policy guideline creation, how do you envision the next phase of AFTS? Particularly, what do you believe are the emerging opportunities and challenges for African fintechs as we enter 2024?

ZA: Our team sees a lot of work to be done in the area of public education. One of the core values we hold at AFTS is the belief that financial inclusion is paramount, but financial inclusion is meaningless without the development of financial literacy. Over the next decade, I believe we will see more and more fintechs operating outside of the Big Four markets. 

This is one of the reasons why we held our summit in Addis Ababa in the past and in Lusaka this year. In terms of challenges, the slowdown we are seeing in venture funding is strengthening the overall due diligence process that fintechs have to go through, and will help to add credibility to the fintech space for those companies that are able to raise funding at this time and those that are able to become cash flow positive.

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A Revolution in your Pocket: How Money Transfer Apps Are Reshaping Africa’s Financial Landscape

by with No Comment FinTech

Source: Mukuru

Have you ever imagined how transformational a small device in your pocket could be? With the rise of technology, specifically money transfer apps, Africa’s financial landscape is getting a substantial facelift.

According to Euro Monitor, as of 2022, mobile money users in Sub-Saharan Africa surpassed 600 million, with transactions valued at over USD600 billion! There is no doubt that we’re seeing a significant shift in how transactions are carried out.

How Money Transfer Apps are Penetrating the African Market

  1. It’s no secret that the traditional banking system in Africa has struggled to reach the wider population. Limited access to banking facilities, particularly in remote areas, and high transaction costs have been significant barriers. However, money transfer apps are beginning to bridge this gap, offering a lifeline to millions who would otherwise be excluded from the formal banking system.

    A new wave of international money transfer apps has emerged, making it possible to send money across borders with just a few taps on a smartphone. This is a huge leap forward, especially for the millions of Africans living in the diaspora, who regularly send money back home to support their families.

    Consider the example of a money transfer app such as Mukuru. With its straightforward interface and secure transaction process, it has revolutionized the way people send and receive money across borders. Mukuru isn’t just a money transfer service; it’s a lifeline, helping millions to support their families from afar.

The Mukuru Advantage in the Evolving African Financial Services Ecosystem

  1. Diving deeper into the realm of money transfer apps, Mukuru stands out for several compelling reasons, especially in the African context. While the primary goal of such apps is to facilitate money transfers, Mukuru goes beyond this basic functionality.

    One of its major advantages is its vast network of payout points across the continent, making it incredibly convenient for recipients to collect money, even in more remote locations. This widespread accessibility ensures that users aren’t just limited to urban centres but can reach deep into rural areas where traditional banking has often fallen short.

    Furthermore, Mukuru places a significant emphasis on customer education and support, which is crucial in regions where digital literacy is still budding. This hands-on approach doesn’t just make transactions easier; it empowers users to take control of their finances with confidence. In essence, while Mukuru streamlines international money transfers, its broader commitment to accessibility, education, and support sets it apart in Africa’s dynamic financial services landscape.

What Came Before?

Before the digital revolution swept across Africa, traditional methods of money transfer held sway. One such system was the hawala, an ancient money transfer system that relied heavily on trust. Originating from Southeast Asia, the hawala system allowed for the transfer of funds without the physical movement of money. In this system, ‘hawaladars’ or money lenders played a pivotal role, accepting cash, charging a modest commission, and then contacting a fellow hawaladar in the destination location to arrange for the funds to be received. For many without access to formal banking, this was their lifeline.

In addition to hawala, other non-digital methods included postal money orders, a service provided by the post office to transfer funds across regions. The sender would pay the amount at one post office, which would issue a receipt. The recipient could then collect the funds at their local post office using this receipt.

Finally, there was the method of physical cash delivery, which was common in local contexts. Here, trusted intermediaries would transport cash from one location to another. Despite the risk of theft or loss, this rudimentary method was often the only choice for many, particularly those in remote areas.

Each of these systems had its own strengths but also faced significant challenges. With the advent of mobile money transfer apps, a new era of secure, affordable, and accessible financial transactions has dawned in Africa.

The Social Impact of Money Transfer Apps

The advent of money transfer apps has been a game changer for small business owners and farmers in Africa. Traditionally, these individuals often found themselves at the mercy of unfavorable loan terms, or even completely excluded from the formal banking sector due to a lack of collateral or well-documented credit history.

Now, thanks to money transfer apps, they can access funds directly and conveniently, right from their mobile phones. This ease of access to finance means they can invest in their businesses, purchase necessary equipment, or acquire additional resources without having to navigate through cumbersome banking procedures.

For farmers, this is particularly transformative. Many farming activities are season-dependent, requiring timely access to funds for purchasing seeds, fertilizers, and other inputs. The ability to transact swiftly and securely through these apps ensures they can procure what they need exactly when needed, improving productivity and income potential.

Furthermore, these apps often come with additional services, such as saving money, paying bills, or even accessing micro-loans. This ease of financial management has led to a more inclusive financial ecosystem, where small business owners and farmers are no longer sidelined but are active participants in Africa’s economic growth story.

Additionally, access to money transfer apps is affecting women in Africa, where these apps have opened up unprecedented opportunities for financial autonomy. In a traditionally patriarchal society, women often face numerous barriers to accessing financial services.

According to the Poverty Action Lab, the rise of mobile money in Sub-Saharan Africa has increased women’s financial inclusion by 22%. By controlling their finances, women are now more empowered to start their own businesses, save for their future, and contribute to their family’s income. This increases the economic stability of households and promotes gender equality and societal change.

The Ripple Effect: Benefits of Money Transfer Apps

The benefits of money transfer apps are far-reaching. They cut out the need for physical travel, saving time and money. They’ve also opened up new opportunities for peer-to-peer lending and microfinance, which are instrumental in driving entrepreneurship and job creation.

By offering lower transaction fees than traditional banks, these apps have made financial services more affordable for the masses. This is particularly beneficial in a continent where every penny counts, and the high cost of financial services has long been a barrier to economic growth.

Where to From Here: The Future of Money Transfer Apps in Africa

As with any innovation, there are challenges to be faced. Regulatory hurdles, cybersecurity concerns, and digital literacy issues are some of the roadblocks. However, the potential benefits outweigh these challenges. With continued investment in technology and digital education, the future looks promising for these apps.

As Africa continues to embrace digital technology, the apps for international money transfer will only become more ingrained in society. We’re on the cusp of a new era, where financial inclusion is not just a distant dream but a tangible reality, thanks to money transfer apps.

The Dawn of a New Financial Era

Money transfer apps are reshaping Africa’s financial landscape from the heart of bustling cities to the remotest corners of the continent. They’re not just changing the way transactions are done; they’re creating opportunities, driving financial inclusion, and fostering economic growth.

It’s safe to say that the age of money transfer apps is upon us, and Africa is at the forefront of this revolution.

The story of these apps is one of hope and resilience, a testament to the power of technology in bridging gaps and making financial services accessible to all.

The small device in your pocket is not just a phone; it’s a powerful tool that’s transforming lives one tap at a time. The future of Africa’s financial landscape is literally at our fingertips, and it’s incredibly exciting to see where it will lead us.

Customers use their phones to scan to pay.

Payment Systems In Zambia

by with No Comment FinTech

Author: Mark Chirwa – Assistant Research & Publications Officer – PAYZ

The Vital Role Payment Systems Play

Payment systems play a vital role in the smooth-running of an economy, especially that every economic transaction involves a payment of some sort to be made. From purchasing a sweet in a shop, buying electricity units, water, school fees, purchasing of fuel, commuting from home to work/school, government dismantling of arrears, social cash transfer disbursement to mention but a few. In short, part of our daily lives is supported by payment, hence, safe, and efficient payment systems become important for financial stability.

According to Bank of Zambia annual payments report 2022[i], Zambia’s national payment system (NPS) is made up of two systems -the Systemically Important Payment Systems (SIPS) and Non- Systemically Important Payment Systems (NSIPS). A SIPS is defined as a payment system which has the potential to trigger or transmit systemic disruptions. This includes systems that are the sole payment system in a jurisdiction or the principal system in terms of the aggregate value of payments, and systems that mainly handle time-critical, high-value payments or settle payments used to effect settlement in other FMIs. SIPS in Zambia include the BoZ operated Zambia Interbank Payment and Settlement System (ZIPSS) commonly referred to as the Real Time Gross Settlement System (RTGS), the Central Securities Depository (CSD) for Government securities, the CSD for bonds and shares at the Lusaka Securities Exchange (LuSE) and the systems operated by the Zambia Electronic Clearing House Limited (ZECHL), which include the Direct Debit and Credit Clearing (DDACC) and the Cheque Image Clearing System (CICS).

On the other hand, NSIPS are retail payment systems that do not have the potential to cause significant disruptions in the payments ecosystem. NSIPS include the National Financial Switch (NFS), systems for mobile money payments, remittances, Automated Teller Machines (ATMs) payments and Point of Sale (PoS) payments.

[i] Bank of Zambia Payments Annual Report 2022

Who Then Are The Players In The Payments Ecosystem

  1. 1-Customers/End user: You and I who access or use these platforms to complete a transaction. Mostly with an anticipation that the payment platform is safe and convenient.
  2. 2-Merchants/Retailer: These are the people selling the goods the people want to buy. For example, the leading retail stores such as Game, Shoprite etc
  3. 3-Payment Service Providers: These are companies that provide payment services. Such as MNO’s and Fintechs.
  4. 4-Banks and Non-Bank Financial institutions: These issue products such as debit cards for customers’ use.
  5. 5-Government: Government also plays a role in the ecosystem, for example Government makes payments to civil servants, to suppliers, to social welfare beneficiaries, these sorts of payments are usually described as high value payments also known as Government to persons (G2P). Citizens also make payments to government as well which is referred to as persons to Government payments (P2G).
  6. 6-Back-end service providers: These are not seen as they operate in the background. These provide services such as payments switching services and aggregation. For example, ZECHL who operate the NFS by providing switching for ATM’s and Mobile Payments.
  7. 7-Regulators: These are institutions with the mandate of regulating the ecosystem such as the Bank of Zambia, Securities Exchange Commission, ZICTA and Pensions Insurance Authority.

What Types Of Electronic Payments Are Available?

  1. 1-Real Time Gross Settlement System (RTGS) – This is operated by the Bank of Zambia and characterized as a high value (Amount transacted) payment platform.
  2. 2-Electronic Fund Transfer (EFT)
  3. 3-Automated Teller Machines (ATM)
  4. 4-Point of sale (POS)
  5. 5-Mobile Money – Characterized as the highest in terms of volumes (Number of transactions).
  6. 6-Money transfer (remittances) – These ranks second in volume of transactions.
  7. 7-Quick Response (QR) codes
  8. 8-Near Field Connection (NFC)
  9. 9-Internet Banking
  10. 10-Virtual Cards

As of December 2022, the RTGS Platform has continued to be the number one payment platform for high value (Amount) transactions processed, seconded by the Electronic Fund Transfer (EFT) this has made the Systemically Important Payment Systems (SIPS) to be the number one system of choice for high value transactions.

With regards to volumes of transactions processed, Mobile money transactions are currently dominating followed by Money transfers transactions (remittances) and POS. This is largely attributed to the increased number of active mobile money wallets, currently above 11 million users (Boz 2022). In terms of volumes of transactions, this makes the Non- Systemically Important Payment Systems (NSIPS) number one system in volumes transacted. This is largely attributed to the increased use and adoption of Digital Financial Services (DFS) by the population.