What is digital payment? It’s the use of a range of technology trends for the buying and selling of goods or services offered through internet or broadly to any form of electronic funds transfer. Some of the known trends accepted in parts of Africa include mobile money, money wallets, ATM cards, wire transfer, credit cards, electronic fund transfer etc.
In West Africa, Ghana to be specific, and some African countries have embraced the digital payment technology. In fact it is a fast growing technology in Africa and it’s creating a lot of competition especially in the banking and telecom sectors. In Ghana, it has become one of the strongest selling tools for the telecoms and the banks. It is bringing about a lot of healthy competition and innovations in these industries. Gone are the days when customers of banks were just sold a current account or a savings account. Now, this continent has come of age. Customers who come to, for instance, the bank leaves with about four products and these include; a current or savings account, internet banking, sms alert and a visa debit card to allow them further their transactions from other point of sale.
Now a lot of customers of these institutions can do transactions online or on their phones in the comfort of their homes and offices, without going to the bank to queue, and people receive alerts on their phones as soon as a transaction hits their accounts. The growth internet usage and the emergence of smart phones on this continent have also helped making this dream come alive. In Ghana for instance, about 75% of the population are now using mobile phones.
Ghana and for that matter Africa as a whole is enjoying some flexibility with these innovative ways of doing business. But at the back drop of these simple and flexible ways of doing business lay a lot of challenges that is making digital payments in Africa very unattractive and slowing the growth of it.
I have identified the following as my top 3 challenges that are making digital payments unattractive; connectivity, illiteracy and cost
- Connectivity: Internet connectivity is very critical when it comes to digital payment. About 80% of the digital payments depend on the availability of a free flowing internet. In this part of the continent it is a big challenge since some countries in Africa still remain unconnected to the most basic store and forward technologies. Even those who have providers present in their countries, lack the ability to coordinate information. There is no mutual national or international coordination due to political instability in some African countries (everybody wants to coordinate, but nobody wants to be coordinated). Aside some southern Africa countries, the majority of our links are connected via Europe and the Americas. My personal experience, I did a transaction through internet banking and it took three days to reflect. And this is a worry to a lot of customers. Also the monopoly tactics employed by some telecom giants in Africa also hinder the swift operation of digital payments. Some service providers are not allowed to provide the value added services due to the monopoly enjoyed by these telecom giants especially if they have government backing.
- The second challenge identified is Illiteracy. The aggregate of illiteracy on the African continent is hovering around 50%. In Ghana for instance, one of the biggest market you can find is situated in Accra central and majority of these traders are illiterates and are finding it very difficult to understand and adjust to the new trends of doing business (ie. Digital payments). They openly oppose the signing on or the usage of these payment solutions. I can’t base my claim on facts but I believe it cuts across the continent hence hindering the rate of adoption to digital payments greatly, considering the percentage of illiteracy on the continent.
- The final challenge I consider as a hindrance to digital payments in Africa will be Cost. There is a smart phone boom in Africa and strong demand for digital payment solutions but the high tariff charges and the cost of even educating the masses on the use of these payment solution is so high that some countries on the continent cannot afford it and resort to the use of analog links that are extremely difficult to integrate to newer technologies. The cost of building and maintaining the infrastructure needed to execute these payment solutions is so high that some telecoms or service providers shy aware from it and making it very difficult to make this dream a reality.
For these payments solutions to survive or work effectively in Africa, telecom companies must begin to work together in achieving singular goal instead of battling to dominate market share. Equally, banks telecom companies and merchants or retailers like, Game Shoprite, Palace, and Melcom should work closely together. Currently some of these retailers are of the view that these banks and telecom companies are out to exploit them and take their moneys. If the cost of operating the payment devices are reduced or shared equally amongst this group of people, I believe it will improve the patronage of the digital payments.
Also if the target market for the digital payments is both the banked and the unbanked, then a lot of compromise must be made. There should not be frequent charges on the use of say money wallets or mobile money and the likes, and whatever will be charged must be explained thoroughly to the user. Lastly, governments put out clear and simple measures so that other service providers can also come in and support with trends and new technologies.