Impact of digital payments on SSA economies

In recent years, the digital payments landscape in Sub-Saharan Africa has been experiencing significant growth and transformation. As highlighted in a recent UN study, the use of existing messaging and e-commerce platforms has opened up access to a wider range of digital financial services, thereby expanding financial inclusion and economic opportunities across the region. To delve deeper into this impactful trend, CNBC Africa spoke to Camilo Tellez, Research Manager at Better Than Cash Alliance, to discuss the implications of digital payments on the economies in Sub-Saharan Africa. Tellez acknowledged the tremendous growth of digital payments in regions like West Africa and East Africa over the past decade. However, he emphasized that the real potential lies in reaching the last-mile customers in rural areas, where mobile and financial penetration are on the rise. Drawing parallels with China's success in social network payments, Tellez pointed out the diversification of channels for digital payments, with the emergence of social media and e-commerce platforms as key drivers of growth. One of the standout success stories in digital payments that Tellez highlighted was the case of M-Pesa in Kenya. He attributed the uneven adoption rates across different parts of Africa to infrastructure challenges and a lack of compelling value propositions for customers. Tellez stressed the need for providers to prioritize user education and trust-building initiatives to drive widespread adoption of digital payment solutions. When discussing the role of collaboration between the private and public sectors in fostering digital payment ecosystems, Tellez underscored the vast potential for growth in sectors like agriculture and FMCGs. By leveraging digital payment platforms to streamline transactions and cater to diverse participants in value chains, Tellez emphasized the importance of aligning incentives and developing innovative products to drive adoption. In terms of regions leading the way in digital payments, East Africa, particularly Kenya and Tanzania, stood out for their success in fostering mobile money ecosystems and nurturing a vibrant FinTech sector. Tellez praised Tanzania's efforts in incentivizing competition among mobile money providers and highlighted the emergence of new products tailored to various target segments within the population. Looking at a country like Nigeria with its sizable population and high smartphone penetration, Tellez discussed the immense potential for digital payments to thrive. He commended the improved regulatory environment and growing alignment with customer needs as key factors that could propel Nigeria into a digital payment powerhouse in the coming years. As Tellez painted a picture of the future of digital payments in Africa, he foresaw a continued diversification of channels and the increasing role of smartphones in driving access to financial services. With a growing focus on user-friendly solutions and partnerships with tech giants, Tellez predicted a wave of new providers and channels emerging to lead the digital financing growth in Africa. In closing, Tellez highlighted the importance of investing in infrastructure and enhancing provider understanding of user needs as critical elements for unlocking the economic opportunities that digital payments can bring to individuals and small businesses in Sub-Saharan Africa.