Payments Challenges in Emerging Markets supporting high growth economies

As the world changes its perception of emerging markets beyond the now well-documented BRICS success stories, Africa and in particular sub-Saharan Africa, comes into focus. So what challenges does the payments community face in supporting multi-national corporates in-country and cross border?

The IMF’s ‘World Economic Outlook’ indicators identify Emerging Market and Developing Country GDP growth rates well in excess of 5% over the next 2-3 years, at a time when the US is forecasting 3% and Europe 1%.

In sub-Sahara Africa (excluding South Africa), where typically less than a quarter of adult populations maintain a bank account, the challenges and opportunities for payments innovation and implementation come in equal measure. The well-known success of the M-PESA mobile payment system in Kenya has not yet found comparable penetration elsewhere, as local conditions vary immensely from country to country.

Cash and cheques continue to be the principal instruments although electronic, card and mobile are all accelerating. At the Barclays Africa Forum that was held in London recently, a ‘Pan-African approach for money transmission architecture’ was described as an achievable priority for Barclays, and may be established as a model for the future. Interesting work is being undertaken in the mobile space and ‘host to host’ services for corporate payments processing.

Meanwhile, as cheque truncation takes hold in Nigeria and Zambia, two of the fastest growing economies in the region, the potential to dramatically speed up clearing cycles through the use of cheque image processing is becoming a reality. This fusion of traditional payments methods and the application of proven, value-adding technology is typical of the transition that is taking place in emerging markets, where customer preference and continuous improvement are key drivers that can co-exist. There are certainly lessons to be learnt here, even for the ‘old’ economies and their payments environments.