Is cash still king in Africa?

Mzukisi Rusi|26 September 2018
Is cash still king in Africa?

Access to innovative new payment methods is no longer confined to the developed regions of the world. Mobile devices of all kinds have transformed how people in several sub-Saharan countries conduct their lives, with homegrown fintech solutions having a particularly strong effect on the way we pay for goods and services, or transfer money to family and friends.

Ever-increasing smartphone uptake on the continent promises to deepen Africans’ reliance on mobile channels to conduct their financial lives. It’s exciting to watch as banks and other enterprises roll out ever-richer mobile payment services on the back of advances in handset capabilities. It’s humbling too, for us at Entersekt, to know that an app or other mobile-based product really can make a tangible, lasting difference to people’s lives.

According to GSMA Intelligence, smartphone connections in sub-Saharan Africa doubled to 226 million between 2014 and 2016. The latter year marked the shift analysts had been anticipating, as smartphone imports overtook feature phones for the first time. By 2017, approximately 63% of the continent had become smartphone users. Although recent statistics indicate a slight decline in the ferocity of smartphone uptake – with economic downturns in key markets a likely culprit – the trend is undeniable.

What payment methods are popular in Africa?

Payments are still largely cash-based, but several governments are pushing hard for cashless or low-cash economies. There is also high demand in some countries for digital payments capabilities from consumers and merchants, whose appetite for mobile transacting arguably has more to do with real-world infrastructural limitations than it does with developed-world notions of “convenience”. (Uptake varies hugely. The Central Bank of Nigeria may have adopted a cashless policy back in 2013, but mobile money penetration there sits at about 1%. Kenya, on the other hand, boasts a rate of 60% according to GSMA Intelligence, although most transactions in Kenya are still cash-based, according to the Oxford Business Group.)

Masters of creative adaptation, Africans have leveraged that one piece of advanced technology within easy reach of the majority of people – what the GSMA describes as “the highest scale consumer tech worldwide” – to solve a large number of challenges. The first transformative mobile money services – M-Pesa, for instance – provided the ability to make remote payments using a feature phone. Their genius was to harness democratic new technologies like SMS and USSD to ameliorate the challenges presented by geography and poverty. Unfortunately, these largely unsecured channels are also more vulnerable to fraudulent attack, and their technical limitations constrain banks and other service providers from designing more sophisticated and convenient mobile experiences.

So how does the continent advance the cashless drive without significant infrastructure changes in traditional electronic payments? Enter QR codes – a technology shaking things up more than two decades after its inception.

As access to smartphones continues to climb on the continent, so does the applicability of QR (Quick Response) payments. QR codes are simply a type of two-dimensional, black-and-white pixelated bar code that you scan using your smartphone camera, which then redirects the user accordingly. Like regular bar codes, QR codes contain a lot of information, but they’re much more versatile and can be used in variety of ways. For this reason, they’ve become popular in the digital payments space.

The beauty of this already (surprisingly) established technology is that anyone can generate and display their own QR codes for others to scan and use via one of several paid-for or free QR code-generating sites or apps. Apps for scanning QR codes, such as SnapScan or Zapper, are available for download to nearly all smartphone devices. Easy to use, easy to implement, and low-cost, it’s no wonder the uptake rate of QR payments is climbing in some of the African countries where smartphone usage is relatively high, and there are sizeable numbers of more affluent and tech-savvy consumers.

Imagine, for example, the difference this could make to taxi drivers and their passengers: scanning a QR code is more convenient for the customer who no longer has to worry about carrying around exact change, and a quicker, safer process for the driver, who doesn’t need to waste time dealing with notes and coins, or worry about the danger of driving around with too much cash.

What’s next?

Internationally, mobile users are exposed to a myriad of exciting payment experiences these days – from Venmo and Zelle to WeChat and Skrill – but banks struggle to predict what their customers’ payment preferences will be a year down the line, as anyone would. A bank may support one QR scheme, but where does that leave its customer when they’re standing at a merchant who only accepts another? How much appetite do any of us have for downloading and provisioning multiple payment apps? And how many QR codes must the merchant display at the point of purchase to be confident they are not turning away trade?

Consumer demand and competition from slick payment apps is forcing card providers and banks to find ways to overcome issues like these. India has already blazed the trail in this arena: an agreement between Mastercard, Visa, American Express, and National Payments Corporation of India (NPCI) has led to the launch of BharatQR, which eliminates the need for consumers to use multiple QR codes from different payment networks and apps when transacting. Similarly, merchants need to display only one QR code at the storefront or through their respective acquiring bank’s mobile app. The move to simpler payments solutions is a worldwide trend and an especially important one in developing regions.

On our own home turf, we’ve seen a market first with Nedbank’s Scan-to-Pay, an in-app feature that allows Nedbank’s customers to use their banking app to scan any QR code. Developed by Entersekt in collaboration with Mastercard, this feature appeared in Nedbank’s app without customers having to enrol – a quick update to the app and it was right there, ready to go. Nedbank customers are now free from having to download additional apps to make payments; they simply use a provider they already trust – their bank – to enable this.

The convenience of QR codes, paired with banking grade security, all converged inside the bank’s mobile app for the ultimate user experience is surely the next step in creating a more accessible payments landscape – not just for Africa, but for the rest of the world, too.

About the author

Mzukisi Rusi

Mzukisi Rusi

Head of Solutions: MEA

Subscribe to our newsletter for our latest news, press releases and events

logo entersekt

Entersekt is an international software development company based just outside of Cape Town, South Africa.

We are leaders in authentication, app security, and payments enablement technology, offering a highly scalable solution set with a track record of success across multiple continents.