The current state of inclusive instant payments in Africa

Many of us take for granted the ease with which we can make and receive digital payments directly from or into a bank account or e-wallet, and the host of economic benefits it brings. Digital payments are not universally available in Africa, however, in part because the payments infrastructure on the continent is not yet fully inclusive—neither in terms of its geographic coverage nor in terms of accessibility, affordability, and functional appeal.

The market is quickly evolving, however. According to The State of Inclusive Instant Payments Systems in Africa 2024 report (SIIPS) by the AfricaNenda Foundation, 26 of the 54 countries in Africa countries have access to a domestic, national-scale instant payment system (IPS) capability. These systems complement the proprietary systems built by banks, mobile money operators (MMOs), and non‑bank providers such as fintechs, as well as private payment networks like Mastercard, Visa, and Onafriq. Collectively, these services already reach millions of Africans.

Still, millions more are left behind: only 55% of adults on the continent had a financial account of any kind as of 2021, and despite a COVID-19-enabled digital payment boost, only 16% of Africans had ever made a digital merchant payment.

Growing the payments industry in Africa will require expanded access to and use of safe, affordable, and friction-free domestic and cross-border payments. Doing so requires inclusive, national-scale IPS that anyone can use and afford, and that offer the channels, use cases, and payment instruments people want.

Here, we offer an overview of the current state of IPS in Africa and what needs to happen to increase their level of inclusivity.

What is an Instant Payment System?

IPS are synonymous with fast payment systems (FPS) or real‑time payment systems(RTPS). Payment service providers participate in them as direct participants, in the case of banks, or as indirect participants, which is often how fintechs and mobile money operators can participate, depending on the rules of a given IPS. Through these providers, IPS enable end users with accounts at different institutions to make digital push transactions in real time.

To be considered an IPS, a payment scheme must fulfill the following criteria:

• Real‑time—The value transfer is instant (within seconds).
• Digital—The system is electronic, and the services are accessible on digitally enabled devices.
• Available—The system is available for use 24 hours a day, 365 days a year, excluding planned maintenance or system downtime.
• Open‑loop—The system is multilateral, enabling payments between customers of different institutions, and thus excludes closed‑loop, on‑us systems.
• Enable push payments—The system enables credit push transactions.
• Irrevocable—Transactions generally cannot be reversed by the payer (except for fraudulent or erroneous transactions).
• Enable low‑value payments—There is no minimum transaction amount.

For these IPS to be inclusive, and thereby meet the needs of the broader market, they must meet several additional benchmarks, as follows:

• Be “cross domain” systems—This type of system allows all licensed payment providers in the country to participate and have equal opportunities to provide inputs into how the system is designed and governed. They contrast with mobile money systems which only serve mobile money operators, bank systems which only serve banks, and sovereign currency systems which only process transactions in central bank digital currencies.
• Operate with central bank involvement—The central bank must be able to shape the system’s governance.
• Offer a full range of use cases and channels—These include person-to-person (P2P), person-to-business (P2B), business-to-person (B2P), business-to-business (B2B), government-to-person (G2P), and person-to-government (P2G) use cases, as well as internet, smart phone, USSD, card, and other payment channels.
• Offer transparent and fit‑for‑purpose recourse mechanisms—The IPS defines the rules by which participants must provide customers with a way to address mistakes or fraud at the IPS level and offers an additional recourse channel at the IPS level in the event that the payment service provider is non-responsive.

As of June 2024, no IPS in Africa fulfills all these inclusivity criteria—though most fulfill some. Before detailing where the inclusivity gaps lie, and what that means for the payments industry in Africa, let us first explore where and in what form IPS functionality is currently available.

26 countries have domestic IPS functionality in Africa

Based on the definition of IPS, there are 28 live domestic systems in Africa and three regional systems, resulting in a total of 31 IPS. One of the regional systems, GIMACPAY, provides domestic payment services for the six countries in the Economic and Monetary Community of Central Africa (CEMAC)—these are Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Equatorial Guinea, and Gabon. Since seven countries have multiple systems (often one dedicated to mobile money operators and another just for banks or for banks and non-bank financial institutions), a total of 26 countries in Africa have domestic IPS functionality as of June 2024 (See map).

Transaction volumes and values passing through Africa’s IPS

The number of IPS has grown significantly in just a few years, from three systems in 2012 to the 31 systems available today. They are also being adopted quickly. Between 2019 and 2023, the volume and value of processed transactions increased by a compounded annual growth rate of 37% and 39%, respectively (see figure). In 2023, IPS processed 49 billion transactions, the highest annual volume yet and 47% more than in 2022. The total annual IPS value has reached over US $1 trillion. Between 2020 and 2023, IPS transaction values increased by 273%.

Mobile money IPS process by far the largest volume of transactions, while cross‑domain IPS process the largest values.

The most popular channels, payment instruments, and use cases

Self-initiated channels such as smart phone apps, internet browsers, and USSD are the most popular channels, with 30, 24, and 23 systems offering them, respectively.

E-money is the most common payment instrument, processed by 20 of the IPS.

As for the use cases, P2P payments are offered by every live IPS. P2B merchant payments are the next most widely available use case, available from 24 systems.

As these patterns in channels, instruments, and use cases show, IPS are launching and developing to increase the functionality they offer to allow end users to manage their financial lives. Yet there are gaps that keep many systems from being fully inclusive. These are clear in non-universality of high-demand channels and use cases.

For example, three systems that launched in recent years chose to bypass offering the USSD or feature phone channel based on the idea that smart phones are becoming more widely used. This poses the risk of excluding millions of Africans who continue to use basic phones, which are both less expensive to buy and are less data hungry than smart phones, and therefore less expensive to use.

Similarly, the variation in available use cases also limits the utility of the IPS, potentially preventing end users from adopting digital methods for a broader range of everyday payment types, like buying groceries, paying for transport, or paying utility bills. G2P payments, particularly disbursements, represent a particular gap, as only six IPS offer them, yet they represent a significant share of household income for the people who receive them.

Africa’s IPS are progressing toward greater inclusivity

Based on the facts around IPS payment instruments, channels, use cases, governance, and recourse, AfricaNenda has categorised each IPS on an inclusivity spectrum. The spectrum classifies IPS as having either basic, progressed , or mature inclusivity (See figure).

The basic level of inclusivity includes two key criteria (IPS are not ranked if they fail to meet both). They are:

1. Enable the primary local channel: The IPS enables the payment channel or channels that the population within its geography uses the most.
2. Enable P2P and P2B (merchant payment) use cases at a minimum: P2P transactions are key for initial digital payment user adoption. Digital P2B payments, including bill payments as well as merchant payments, are also the main driver of transaction scale for an IPS.

Progressed systems fulfill all the basic level criteria, as well as the following three governance factors:

1. Allow all licensed PSPs to utilise the system: The IPS is open to any licensed payment service provider, including a commercial bank, MMO, MFI, or fintech.
2. Engage in pro‑poor governance through joint decision‑making: The IPS has established provisions and processes to allow all system participants to provide input into decision‑making and design, thereby creating a level playing field.
3. Include the central bank in governance: The IPS actively collaborates with the central bank as the regulator and supervisory entity, such that the central bank can ensure that the inclusivity goals specified in its policies translate to the IPS’ rules.

IPS that achieve a mature level of inclusivity have fulfilled the basic and progressed level criteria, as well as the following three additional conditions:

1. Enable all use cases: The IPS enables the full range of use cases for a holistic digital payment ecosystem that enables the circulation of liquidity completely through digital channels.
2. Provide additional recourse: The IPS ensures providers have systems for end‑user recourse consistent with consumer protection, data privacy, and cybersecurity laws. The scheme rules also mandate recourse options at the IPS level, giving end users an additional avenue for disputes should provider channels prove insufficient.
3. Serve end users at low cost: The IPS operates according to cost‑recovery or not‑for‑loss principles, so that end‑user transaction fees are as low as feasibly possible.

Based on these definitions of inclusivity within the spectrum, twelve IPS are at a basic level of inclusivity and nine IPS are progressed. The nine progressed IPS cover thirteen countries on the continent, given that one of them is the GIMAC regional scheme. No system is mature yet. Compared to 2023, when twelve IPS were unranked and only five had reached the progressed level of inclusivity, the 2024 placements show more systems with progressed inclusivity.

What’s next for inclusive IPS in Africa?

IPS stakeholders are increasingly aware of the ways in which inclusivity in payments systems motivates payment service providers to engage and participate and thereby increase end‑user access.

The IPS that achieve inclusivity gains in the near term will do so by focusing on enabling end‑user recourse and unlocking further use cases. These represent the biggest gaps in fulfillment of the inclusivity criteria. Recourse is particularly essential, given that a lack of trust and concerns of fraud are key barriers to uptake of instant payments.

To be clear, payment industries are highly complex, and the enablers of inclusivity are not the sole domain of the IPS scheme. Governments also have a role to play, given that national and regional financial inclusion strategies and their impact on regulations including KYC rules, payment service provider licensing regimes, cross-border harmonisation, and consumer protection all contribute to the enabling environment for seamless digital payments.

IPS nonetheless represent essential infrastructure with the potential to provide access to digital payments for everyone, not just the 55% of Africans who are already served by existing systems. Expanding access will expand the market and deliver untold economic benefits to the entire continent.