When it comes to Network International’s progress in Africa there are many strong themes. I’d like to touch on just a few of these here.
The first is investments in multiple African markets in technology infrastructure and people. These investments are the result of Network’s firm belief in the economic potential of Africa and our role in helping economies and businesses to grow by simplifying payments and commerce.
Investment will support Africa’s progress in financial inclusion objectives and accelerate the transition from cash to digital payments, thereby accelerating GDP growth.
To make payment processing more agile, secure and efficient for the region’s banks and financial institutions, we are investing towards innovative solutions that drive revenue and profitability to our customers. We are also making digital payment acceptance economically feasible for many small merchants through low-cost payment acceptance solutions.
Growing our capabilities and resources in Africa will enable us to continue diversifying our customer base well beyond traditional banks. Our strategic focus on fintech and MNO segments, for example, has started to yield results. Right now, we currently serve more than 160 financial institutions and fintechs across Africa, including pan-African banks, MNOs, and government bodies.
Another testament to our growth momentum is our recently formed partnership with the financial services business of Vodacom, a leading MNO in Africa, for card-issuing processing, merchant-acquiring processing, transaction switching and other value-added services.
Vodacom is currently undergoing onboarding as the first tenant of our Network One platform in South Africa, and multiple fintechs in Africa have partnered with Network this year for payments solutions.
Digital transformation
Another theme of our business is that of being at the forefront of government agendas on financial inclusion and digital transformation, including increasing digital payments to grow economies. For example, the Egyptian government’s 2030 agenda includes objectives related to accelerating digital transformation.
To support such initiatives, we have been developing new solutions and capabilities tailored specifically for Africa.
For outsourced payments, the range of new APIs and fraud solutions we are deploying in South Africa is designed to enhance security, streamline payments, and improve the overall payments experience. Our APIs are optimised for faster and more efficient payment processing, while our real-time fraud detection solution uses advanced algorithms powered by Artificial Intelligence.
We are also leveraging our expertise in merchant services to support commerce in the region. Our N-Genius e-commerce platform widely adopted in the Middle East is now live across 26 African countries, and we launched our direct-to-merchant services in Egypt at the start of the year, building on our already well-established presence as a processing services provider for banks in the country.
We will continue to develop and deliver advanced and innovative solutions and forge partnerships with more fintechs, governments, financial institutions and telecom operators to develop market-relevant, digitally driven solutions.
Open banking
Open banking is steadily gaining traction across African markets, which are ideal areas to nurture open finance. Open banking enables fintechs to access new markets while unlocking new business opportunities for banks.
According to the World Bank’s 2021 Findex survey, some 45% of sub-Saharan Africa’s adult population remains unbanked, holding neither a bank account nor a mobile money account. This is remarkably high compared with other regions such as East Asia & Pacific, where the proportion is just 17%.
Open banking represents a huge opportunity to massively drive financial inclusion in Africa, especially towards rural areas. Africa’s central banks have been commendably leading the way in open banking adoption, and Network intends to fully support open banking as a growth lever for financial institutions in the region.
Fintech sector
Africa’s fintech sector is a story of growth. According to McKinsey, the penetration of fintech revenues in terms of share of financial services revenue stands at 2% to 3% in Africa. However, if you exclude South Africa, the penetration is 3% to 5%, which is in line with global benchmarks for developed countries.
Fintech growth in the 54 African countries will not be uniform. According to McKinsey, the leading markets and regions in terms of growth will be Ghana, Francophone West Africa, Nigeria and Egypt. Network is aligning its strategy to complement the region’s fintech narrative; we are introducing solutions for new use cases as “fintech in a box” and companion cards for mobile money.
Regulation
Regulation can prove both a threat and an opportunity to fintech. Fragmented regulatory frameworks evolving at different paces pose a challenge to fintechs aiming to expand pan-Africa, while ensuring business continuity and compliance across markets. The countries of Africa are at different stages in their journey towards strengthening the regulatory environment to help fintechs offer their services in the market.
For example, open banking in Africa is nascent and largely limited to four key African markets. Regulator-led initiatives have been observed in few countries, notably Egypt, Kenya and Nigeria. In fact, South Africa is the only African market where banks have taken the lead in implementing open banking concepts without waiting for a regulator to establish a framework.
Meanwhile the harmonisation and streamlining of licensing requirements, potentially across borders, could also enhance the speed and scale of fintech growth.
Increasingly supportive regulatory frameworks are enabling the fintech ecosystem to facilitate such innovation. According to UNCTAD, 39 out of 54 African countries have either legislation or draft legislation in place on data protection and privacy, creating clarity for new fintech entrants.
And during the last four years, Ghana, Sierra Leone, Kenya, Rwanda, Mauritius, Mozambique, Nigeria, Uganda, Tunisia, and South Africa have set up regulatory sandboxes. These sandboxes provide a route to market for innovative fintechs while helping governments to solve the challenges of financial inclusion and financial stability.
Positive regulatory policy agreements, such as the African Continental Free Trade Area and the planned roll-out of the pan-African Payment and Settlement System may open further avenues of growth for fintechs, which can provide digital solutions that solve the challenges of increasing cross-border payments.
Financial services infrastructure
Current leaders of Africa’s fintech sector have been focused on building the foundations of a financial services infrastructure, with basic solutions tailored to African customers such as wallets (P2P), bill payments, remittances, and payments both offline and online.
In the next phase, fintechs will focus on advanced services such as lending, wealth management, banking as a service, and business services, for example analytics, invoicing and spend management.
In the short term, payments and wallets are likely to grow fastest, both at around 20% CAGR from 2020-2025, according to McKinsey.
Again, the demand for fintech services will vary across countries in the next phase. Economies with advanced financial systems and digital infrastructure, prime example being South Africa and Nigeria, are likely to see demand for innovation in advanced services, such as B2B liquidity and regulatory technology, such as AML and KYC compliance.
Markets where financial systems and infrastructure are still growing, such as Egypt, are likely to see demand for services like banking-as-a-service (BaaS), embedded finance, BNPL services and SME lending. Network will tailor its offerings to meet the needs of these markets.
Digital payments
Meanwhile digital payments can benefit the economy. The availability and greater usage of electronic payments leads to a virtuous economic cycle whereby increased consumption leads to increased production, more jobs and greater income and, ultimately, stronger economic growth.
Each small portion of friction that electronic payments eliminate for the participants in the economy, contributes to higher consumption and GDP.
Finally, in my summary of Network International’s progress in Africa and key factors that influence our momentum, I turn to economic opportunities that could be addressed by digital payments.
These include expanding mobile money usage to additional financial services, beyond P2P/remittances, a need for investing in accessible and trusted identification systems in SSA, expanding mobile phone ownership, and increasing account ownership by digitalising payments currently made in cash, including payments for agricultural products and private sector wages.
