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From Chinenye Anuforo, Nairobi, Kenya
Africa’s push to expand instant and digital payments must go beyond traditional banks to include mobile money operators, microfinance institutions (MFIs), savings and credit cooperative organisations (SACCOs), fintechs and other licensed financial service providers if the continent is to achieve meaningful financial inclusion, the AfricaNenda Foundation has said.
John Muthiora, Technical Payment Specialist, AfricaNenda Foundation, made the call during the foundation’s ongoing media training in Kenya, where he took participants through the development of inclusive instant payment systems across Africa.
Muthiora said an inclusive instant payment system should not be designed around banks alone, noting that millions of Africans access financial services through non-bank providers.
Speaking on understanding inclusive instant payment systems in Africa, Muthiora said the objective should be to create an interconnected ecosystem in which customers can transact across different types of regulated financial institutions.
“It should include you if you have only an MFI account. It should include you if you’re rural and you only have a SACCO account,” he said.
He added that the same principle should apply to people whose only financial account is with a fintech, including those who use such accounts to receive money from family members.
“The idea is it should be fully inclusive, not just of the individual people, but even of the types of institutions which are licensed to offer accounts in their country,” Muthiora said.
He described these institutions collectively as Digital Financial Service Providers (DFSPs).
Muthiora said interoperability is critical to achieving this form of inclusion because customers should be able to transfer money between different financial institutions without being forced to maintain multiple accounts or liquidity arrangements.
He explained that under fragmented systems, financial institutions may have to maintain separate pools of money with different institutions to facilitate interoperable transactions, creating additional costs and operational challenges.
An integrated instant payment system can simplify the process by creating a common pool of liquidity through which participating institutions can settle their obligations, he said.
Muthiora also warned that Africa’s digital payment infrastructure must not be designed exclusively for smartphone users.
“If the only way our system can communicate with its end customers is a smartphone, we’ve already excluded some people,” he said, stressing the importance of USSD and other channels that work on basic or feature phones.
“In fact, in some countries, we’ve excluded most of the people.”
He said this was particularly important in rural and low-income communities where smartphone ownership, reliable internet access and electricity remain challenges.
Muthiora said financial inclusion is not simply about providing people with access to the latest technology, but ensuring that they can actually afford and use financial services.
He also identified government payments as an important use case for instant payment systems, noting that governments employ millions of people, collect taxes and fees, and make payments to citizens and businesses.
Digitising these transactions could reduce the cost and inefficiencies associated with moving physical cash, he said.
Muthiora cited cases of civil servants in remote areas who have to travel for several hours to access their salaries, sometimes finding that a bank branch does not have sufficient cash and having to travel to another location.
Such journeys can take days and impose additional costs on workers.
Instant payments could help address these challenges by allowing people to receive money digitally without travelling long distances to access cash, he said.
He added that central banks and financial institutions also incur significant costs distributing, transporting and securing physical cash.
Cross-border payments are another major gap, according to Muthiora, who noted that traders operating between African countries can be financially included in their home countries but still face difficulties when they cross borders.
He said interoperable payment systems could help address some of these challenges, particularly for micro, small and medium-sized businesses involved in cross-border trade.
Muthiora said countries seeking to build and scale instant payment systems must focus on four key areas: regulatory and governance, technology, commercial and pricing structures, and operations.
He said the process should begin with a clear national vision and assessment of the problems the system is expected to solve, followed by ecosystem assessment, design, development, testing, launch and scaling.
“Regulatory and governance is one. Technology is a second. Commercial, business and pricing is one. And then finally, operational,” he said.
According to Muthiora, the success of instant payments should not be measured simply by how quickly money moves.
For the systems to deliver meaningful financial inclusion, they must be accessible, affordable, interoperable, available 24/7 and usable by people regardless of the type of licensed financial institution they use or the type of phone they own.
The goal, he said, is to ensure that digital payment infrastructure does not simply make payments faster for people who are already well served, but also brings previously underserved consumers and businesses into the digital financial ecosystem.
