Posts in category: FinTech

The year 2024 marked a period of robust growth and transformation for Zambia’s National Payment Systems (NPS). Driven by policy reforms, technological advancements, and evolving consumer preferences, the NPS achieved significant milestones in transaction processing, system modernization, and regulatory oversight. Without wasting time, let’s dive into the excitement.

Mobile Money and Financial Inclusion keeps surging at an interesting pace. This is mainly monitored through metrices such as the rise in digital assets and patronage.

• -In 2024 Mobile Subscribers rose slightly to 19,604,415 from 19,477,324 in 2023
• -There was a reduction in Registered Mobile Money Wallets to 14,650,368 from 17,290,646 in 2023, this was mainly due to the cleanup of dormant and irregular accounts as a fraud mitigation measure.
• -Active Mobile Money Wallets stood at 12,328,755 in 2024 indicating a reduction from the 2023 records due to the above motive.

Notably, the proportion of active wallets increased to 84.2% (2023: 74.8%), indicating deeper engagement with mobile money services amid ongoing digital transformation. This highlights wallets on the main players in the Zambian mobile money wallet including Airtel, MTN, Zeepay and ZAMTEL among others.

Transaction Growth and System Performance

Overall Transaction Trends

The NPS recorded a notable surge in both value and volume of processed transactions in 2024:

• -Transaction value grew by 54.3% to ZMW 5.4 trillion, up from ZMW 3.5 trillion in 2023.
• -Transaction volume increased by 9.4% to over 4.07 billion transactions, compared to 3.72 billion in the previous year.

This growth is a testament to increasing digital adoption and the effectiveness of recent reforms in the ecosystem.

The Zambia Interbank Payment and Settlement System (ZIPSS) which is the country’s Large Value Payment System, experienced a remarkable 73.5% growth in processed transactions. The expansion was primarily fueled by interbank and government payments, reflecting a shift toward more efficient, electronic settlement channels.

Retail payment channels especially mobile payments and point-of-sale (POS) transactions—continued to expand, underscoring a broader transition to digital payment methods among consumers. The Bank’s sustained awareness campaigns and stakeholder collaborations played a pivotal role in this positive trend. The mobile money payment distribution is spearheaded by a network north of 160 thousand mobile agents while Zambia boasts a total of 53,043 POS terminals deployed country wide. This has increased merchant payments at agent locations and business fronts.

Net Remittance Value

We wouldn’t perform justice to the ecosystem without highlighting the strides in the international remittance sphere. The net value of international remittances more than doubled further underscoring the sector’s dynamism.

Main Source Countries: The USA and UK accounted for 57% of inbound flows.

Main Recipient Countries: India and Tanzania received 35% of outbound remittances.

The increase to USD 300 million (depending on whose reporting) in value has been driven by an increase in terminating partners, expanded collaboration with Mobile Network Operators, new corridor availability as well as agility and innovation disruptions from fintech such as Zeepay which strives to create a financially borderless Africa.

The above strides in the ecosystem have been possible through collaboration of players and the adaptive regulators. The regulator significantly the Bank of Zambia, plays a pivotal role as the bank needs to set policies and frame works strong enough to ensure financial stability and safeguarding of customer funds while ensuring enough flexibility enabling innovative transformation from the sector players.

To ensure the resilience and efficiency of the NPS, the Bank implemented several key policy measures in 2024:

• Extended Operating Hours: ZIPSS and the Central Securities Depository (CSD) piloted extended hours (07:00–19:30), supporting the government’s 24/7 digital economy initiative.
• Cheque Phase-Out Roadmap: Following stakeholder consultations, a roadmap for the gradual elimination of cheques was issued.
• Consumer Protection: New directives were introduced to prohibit unwarranted charges on electronic money services.
• Payment Aggregation Regulation: Draft regulations for payment aggregation services were developed, with final issuance expected in 2025.
• Crypto Asset Framework: The Bank drafted a framework for crypto assets and stablecoins, set for stakeholder review in 2025.
• Open Finance Assessment: An open finance feasibility study produced a draft roadmap, currently under review.

These measures align with the Bank’s 2024–2027 Strategic Plan, focusing on price stability, financial inclusion, and organizational resilience.

The performance of Zambia’s National Payment Systems in 2024 reflects a significant milestone in the country’s journey toward a more inclusive, efficient, and secure digital economy. The impressive growth in transaction volumes and values, coupled with strategic policy interventions and technological enhancements, underscores commitment to fostering a resilient financial ecosystem.

Continued efforts to expand digital payment channels, protect consumer rights, and embrace innovative financial technologies position Zambia to capitalize on emerging opportunities in the regional and global financial landscape. Moving forward, sustained collaboration among stakeholders and adaptive regulatory frameworks will be critical to maintaining momentum and ensuring that the benefits of digital financial services reach all segments of society.

The rapid evolution of technology, shifting consumer behaviours, and the increasing demand for instant payments have reshaped financial transactions. As online and mobile banking and ecommerce continue to grow, so do the threats associated with fraud and scams. From credit card fraud and identity fraud to wire fraud and tax fraud, financial criminals are becoming more sophisticated, exploiting vulnerabilities in payment systems and security protocols.

Managing fraud risks has never been more complex. Several key factors contribute to the growing challenge:

• Technology advancements – the widespread adoption of AI, GenAI, ML, biometrics, graph analytics, and blockchain is transforming the way fraud is detected and prevented. While these tools provide enhanced security, fraudsters are also leveraging cutting-edge technology to develop more sophisticated attack methods.
• Evolving fraud patterns – fraudsters continuously refine their methods, making it difficult for businesses to keep up. From payment fraud and Ponzi schemes to investment scams and social engineering, criminals use various tactics to deceive financial institutions, merchants, and consumers. Authorised push payment (APP) fraud and instant payment fraud have become particularly concerning, as real-time transactions leave little room for intervention once fraud occurs.
• Regulatory compliance – banks, fintechs, PSPs, and ecommerce platforms must adhere to AML, KYC, PSD3, Open Banking, and AI-related regulations, which are constantly evolving. Ensuring compliance while maintaining seamless customer experiences presents a major challenge for financial institutions operating globally.

Globally, digitalization has been the most significant change in the financial sector in recent years. Banks and financial institutions are increasingly offering online services such as mobile banking, e-wallets, and digital wallets like PayPal, Alipay, and Google Pay. These technologies have streamlined payments, reduced costs, and expanded financial inclusion by providing access to underbanked populations (Tuyon,2022)

In Zambia, the fintech ecosystem has not lagged behind. Several fintech startups have emerged, focusing on services such as digital wallets, peer-to-peer (P2P) lending, and remittances. The majority of fintech services in Zambia are concentrated on the following verticals: (i) developing enabling technologies for the financial sector, (ii) digital payments and money transfer, and (iii) digital lending. There are also emerging players offering services such as savings, microinsurance and asset or wealth management. After digital payments, the second largest fintech vertical is digital lending, with 18 fintechs having fully digitised credit processes (UNCDF, 2023). These startups are often seen as a means to increase financial inclusion by providing easy-to-use digital platforms that cater to underserved populations.

QR codes have gained widespread popularity for their convenience and efficiency in accessing information, making payments, and interacting with businesses. However, with their increased usage comes the risk of QR code scams, which can compromise your online security and personal information.

The rising tide of online fraud

The 2024 Global eCommerce Payments & Fraud Report reveals a troubling, yet unsurprising trend – fraud is on the rise globally. The data, collected from hundreds of merchants around the globe, shows that they faced a greater variety of fraud attacks in 2023 than in any other year. Most commonly, merchants encounter three to four different types of fraud every year, including refund/policy abuse, first-party misuse, account takeover, loyalty fraud, and triangulation schemes.

Key insights

• Refund/policy abuse impacted 48% of merchants in 2023.
• First-party misuse affected nearly 45% of merchants.
• Account takeover is increasing in prevalence with a significant impact.
• Loyalty fraud and triangulation schemes are steadily emerging as major concerns.

These numbers indicate a growing challenge for merchants worldwide, emphasising the need for fraud prevention and management strategies that tackle fraud head-on and stay one step ahead of the perpetrators.

A unified KYC is a database linking infor­mation on each unique individual within that country’s ecosystem. KYC (Know Your Customer Compliance) is one of the most important essential requirements for fi­nancial institutions when determining the validity of transactions. In Zambia the re­quirement forces institutions to report all transactions above a certain threshold and often requires account holders to provide sufficient information to prevent identity fraud, money laundering and track per­petrators of such crimes. This process is considered flawed with significant gaps in information preventing effective enforce­ment of the laws. While companies abide by regulation mandating information col­lection, the data is often inconsistent or in­accessible to the relevant authorities; this is often due to the data being physically stored, with each company having silos of unique information about each consumer.

The objective of a unified KYC is to digitise and unify this data to allow the relevant authorities to discover patterns of fraudu­lent activity and identify the perpetrators of this behaviour. Recently with an up­ take in cyber-crimes in Zambia, the trend among the attacks on the industry implies the orchestrators of such attacks are tak­ing advantage of the lack of information sharing in the industry to commit fraud­ulent transactions. The first successfully executed unified KYC system was estab­lished in Estonia in 1992 and is largely at­tributed with halting cyber-crime. To date 98% of Estonians have a ‘National ID Card’ which has been used for digital signatures nearly 1 billion times.

International remittance has continued to remain significant on the African continent. Senders remit funds back home for various purposes including food, health, education and family support during tough times. For many, sending money home assures a sense of belonging as they feel closer to family.

There has been an increase in migration stock from and within the African continent post the COVID-19 pandemic, mainly stemming from the economic constrains experienced in several countries. History has proven that, increase in migration results in the increase in remittance as migrants send money back home. Currently 40.4 million Africans have migrated, among which 20.7 million have migrated intra-Africa. This indicates an increase of 2.6% CAGR in five years. We will further experience increased intra-Africa migration as the African Continental Free Trade Area (AfCFTA) is actualized in several countries. 

In most cases an individual will migrate and settle in a host country and invite family as well as friends to settle join. The largest source countries for migrants are Egypt, Morocco, South Sudan, Somalia, Nigeria, Cameroon, Eritrea and the Gambia. With the largest host country being France with an estimated 4.3 million African migrants while on a continental front, Europe hosts 11 million Africans, Asia 4.8 million, and North America with 3.3 million. On an intra-Africa scope, there has historically been a strong movement towards South Africa, while Ivory Coast has the largest number of African migrants with UNDESA recording 2.5 million. The largest country of origin on the continent being South Sudan with 2.5 million emigrants mainly to Uganda, Sudan, Ethiopia, Kenya and the DRC.

Informed by the migration stock, Africans in the diaspora continue to increase the value of money sent back home as they support family, and friends cope with the economic turbulences. Remittance value has grossed USD 100.1 billion in Africa. This is more than the Foreign Direct Investments (FDI) and twice the Official Development assistance (ODA) received on the continent.

Remittance flows are a major contributor to the GDP of several countries hence the economic significance.   This refers to countries like The Gambia, Comoros, Lesotho, Cape Verde and Guinea Bissau, where remittances represent more than 10 percent of GDP.

It is interesting to note that, 65 percent of the total remittance flow was directed to Egypt, Nigeria and Morocco in 2022. With the major send countries being the United States, Italy, France, United Kingdom and Canada. Intra-Africa remittances have further continued to surge with the top 5 largest corridors in being Cameroon – Nigeria 1.3 billion, Niger – Nigeria 1.2 billion, South Africa – Zimbabwe 957 million, Nigeria – Ghana 809 million and Benin – Nigeria 696 million. 

While the above remittance performance is exciting, I am quick to mention that sending money in Africa is still very expensive. Some countries and regions have fees as high as 11 percent. Therefore, have a long way to go in achieving Goal 10. of the United Nations Sustainable Development Goals, which aims at dropping the remittance fee to 3 percent by 2030.

Digital financial institutions such as Zeepay are leveraging international remittances to disrupt the mobile money ecosystem. Zeepay prides itself as an enabler in reducing remittance fees, breaking financial borders while increasing financial inclusion in Africa from the current 51 percent.

The future of remittance and payments is an interesting one, as several factors are taken into consideration to drive growth as well as sustainability. Among these are, infrastructure and technological investments, proliferation in mobile wallet use cases, convenient cross border payments as well as collaboration among players in the Digital Financial Ecosystem. 

I am excited to see how the next two years will unfold!

Source: RemitSCOPE Africa, World bank

According to the FinScope (2020) Survey findings, the increase or growth in the Zambian financial inclusion is mainly attributed to increased uptake of mobile money which registered an increase from 14% in 2015 to 58.5% by 2020. Financial Products or services means a product or service related to finance, including banking, securities, consumer credit, or money transmission. By enabling poor households to use products and services of formal financial institutions to optimally maintain accounts, they will have better access to financial products such as:

•    – Payments
•    – Savings
•    – Credit
•    – Risk Management tools such as insurance

A critical look at the factors of financial inclusion reveals why each of them is necessary

Payments

Financial inclusion starts with payments. They serve as a gateway to other financial services. Mobile money payments in Zambia have grown to an annual average of 126% in value, from K2.07 billion in 2015 to K452.0 billion in 2023. To improve financial inclusion, these transaction accounts need to enable end users to meet most, if not all, of their payment needs and to safely store some value.

Savings

Savings are also an important aspect of financial inclusion. The emergence of mobile money banking services has been seen as a blessing to many low-income earners in Zambia.

Luke Bwalya is a 27-year-old informal trader in Lusaka, the Zambian capital, who has never opened an account with any bank since he started his business of selling various merchandise. According to him, banks are for people with a lot of money. Savings are important for smoothing out peaks and troughs in income and expenditure.  The poor do save using mainly informal sector financial services and that savings have an impact on poor people in three key areas being;

(1)         Wealth accumulation to finance a household’s long-term goals

(2)         Insurance against illness, death and sudden income losses and other contingencies;

(3)         Safeguard against uneven income streams due to seasonal variations

              (savings of high-income periods are used to finance consumption expenditures during low-                     income periods); and

(4)         Savings for future investments in education for children and other human resource                                    development investments. Mobile money electronic accounts offer the safe storage of cash,                  though without the payment of interest. Savings on a mobile money platform has been made                  much easier as mobile money agents are found.

Credit

Improving credit access in Zambia is key to not only increasing formal financial inclusion but also to growing and developing Zambia’s ever-changing economy. Access to credit for Zambian household enables poor people have assets they need to transform to economic empowerment, access capital for SMEs and help pay school fees.  However, credit should be well regulated otherwise the burden of it can render it useless. Zambians are using SGs to access credit and this has shown that closer user SGs experience more trust that microfine.

Digital credit has become quite popular for women and all other customers on mobile money platforms. From the credit exposure algorithms determined over data on mobile money, a service provider can advance a determined amount to a user. This is faster access to credit and goes a long way to supporting women businesses.

Insurance

Insurance is one of four pillars of financial inclusion. Insurance products can make a significant positive difference in the lives of vulnerable individuals by helping households mitigate shocks and improve the management of expenses related to unforeseen events such as medical emergencies, a death in the family, theft or natural disasters. However, there is a persistent insurance gap, particularly in developing countries. Insurance is one of the least used financial services, meaning low-income households and individuals are needlessly vulnerable to risk and financial shocks.

Zambia is no exception; current insurance penetration is very low, aside from mandatory insurance such as motor vehicle cover, still skewed towards high-income population segments. Inclusive insurance is recognized as a valuable means to stabilize and even improve income for individuals, households, and businesses. It can be used alongside credit, savings, and transfers to mitigate and financially relieve the potential financial losses faced by middle or low-income individuals and micro, small and medium sized enterprises (MSMEs). These include health, disability, and accident-related risks, or the death of a family member. Insurance can also protect assets including houses, livestock, or vehicles, against the repercussions of theft, fire, death, loss, or the impacts of natural disaster and climate change. It is widely recognized that, over time, inclusive insurance can improve welfare. It builds financial resilience, cushioning individuals, households, businesses, and communities from economic shocks, preventing them from falling into poverty or becoming poorer.

All the above financial products give women basic tools they need to prosper in the economy. Without them, women can struggle to start businesses, save to match earnings to their cost payments over time, invest in the future, and provide for their families. Closing the gender gap in DFI will have positive effects.

Having better access to and use of a range of financial services also contributes to women’s autonomy, allowing for better use of their personal and household resources, and reducing the vulnerability of their households and businesses.  In a nutshell, increasing financial inclusion for women can act as an enabler of countries’ development, economic growth, inequality reduction, business evolution, and social inclusion.

How to grow women’s access for financial services in Zambia

The plan to achieve greater women’s financial inclusion is dependent upon the creation of a more gender inclusive financial system that addresses the specific demand and supply barriers faced by women, supported by an inclusive regulatory environment.

Factors necessary for the achievement of full digitized financial inclusion

Access to financial services is a prerequisite for uptake and usage of services. There are various reasons for the lower uptake of financial services by women. The three most important ones are access to cell phones, digital financial literacy, and KYC rules.

According to a wide range of research available, including FinScope 2020 and the ZICTA Survey 2018, many women do not have mobile devices that can enable them to access DFS. Data shows that about 40% of women do not have cell phone access.  FSD Zambia’s recent work to distribute cell phones and solar mini chargers to women found that they were extremely enthusiastic and empowered to expand mobile money services and knowledge.

Low levels of financial literacy among women discourage even owners of mobile phones to utilise them for different types of transactions. In some countries of the sub-Sahara, deliberate programs have been designed to send young people into communities to teach women and older citizens how to operate a mobile hand device. 

FSD Zambia undertook a pilot community radio programme for digital financial education called Bank Yako in Eastern Province and showed significant results, particularly for women.

Many women do not have the formal identification documents to meet the requirements for Know Your Customer (KYC). This becomes a problem as women begin to move from informal financial services to formal ones. Most women will not remember where their one acquired paper-based National Registration Card (NCR) identity card is stored. Implementation of an electronic/biometric identity system is a good solution for this complication, and development of the approach is well under way in Zambia.

Once these barriers of cell phone access, digital literacy, and identity are addressed, the issue of the right financial product to attract women becomes more immediate. Many financial services providers do not work out client-centric product development when it comes to serving women. Since their products and services are only superficially tailored to meet men’s needs, most women remain un-served as they do not find reasons justifying use of existing financial services. Service providers must avoid gender-neutral approaches, adopt gender segmentation during research and product design, and articulate a clear business case for reaching underserved women.