The Current Situation and Obstacles of The African Payments Sector

Some Recent Key Developments in the African Payments Sector

As mentioned, the main development in the African payment sector has been the development of mobile payment applications. Well, this has also opened some opportunities to greatly improve people's experiences with payment systems. According to Finance Magnets, the introduction of open banking in recent years has allowed users to link their banking information to outside suppliers and service providers. This allows for more interaction and, hence, gives users more access to goods and services.

For example, this allows people interested in trading to easily make deposits and start their trading journey. As such,various Nigerian forex platforms have seen a surge in the number of African traders investing with them. Other service providers have also seen a gradual increase in their user bases as open banking and collaboration increase.

Moreover, this open banking policy encourages competition, innovation, and choice among consumers. The different financial service providers are constantly trying to outdo each other leading to better services for the consumers. They can then pick and choose the best platform with the best offering for their needs. Better yet, this innovation has led to ease of use that has helped onboard a lot of unbanked individuals onto these various payment systems available. Even new technologies, like cryptocurrencies, are seeing great adoption among the African population.

Obstacles of the African Payment System

 As the payments sector in Africa is dominated by mobile money applications, the same obstacles affecting the mobile money sector also affect the whole payment system. One of the major obstacles to this industry has been cross-border transactions. It is very easy for a company to launch and establish a footing in one country. However, expanding to a neighbouring country can be a tough task as regulatory policies might change from country to country.

Without collaborating with counterparts in neighbouring countries, it can be hard to support cross-border transactions. Moreover, most of these companies would rather expand independently and not have to share profits with their partners. As such, collaboration can be a tough task. Further, there is no general regulatory framework that would allow collaboration and govern how the collaboration would look like.

The other obstacle that is slowly dying is the lack of trust in the various payment systems. It can be hard to drive the adoption of new technologies, especially in remote areas where lack of education can be a huge problem. However, the efficiency and reliability of the payment systems in Africa have been a driving force for the adoption of said technologies. More and more people are open to using mobile payment systems as they are fast, convenient, and offer a layer of security not available when dealing with cash. The main trust issues today lie in the company running a particular payment application.

Importance of Regulation of the African Payments Sector

Digital and online transactions always invite the possibility of fraudulent activities. It is very easy for someone to set up a scam operation pausing as a legitimate company. Some of these operations don't even need that much to set up. There are countries that allow people to set up businesses with real licenses without having to set foot in the said country. As such, there is a need for regulation and oversight over these activities to ensure that consumers are adequately protected.

Moreover, regulation ensures there is a fair operating environment for all parties operating a payment system. For example, regulation can help establish fair competition and discourage monopolies. However, regulation has had huge challenges as technology is growing faster than regulators can keep up. After all, there is no established regulatory framework to inform regulations.

The Way Forward With Regulations

According to FinanceMagnates, there are several steps policymakers can take to lay regulatory laws in the market. A great start is attempting to create a technology-neutral framework that would inform even future regulations. This way, policymakers can apply their rules and guidelines regardless of how fast technology moves. 

Another crucial step is establishing consumer protection measures. These include establishing means of seeking justice in case of grievances such as dispute resolution methods, compensation plans, and a complaint handling system. Additionally, regulators should encourage openness and disclosure by payment application operators. They should ensure that they clearly and understandably disclose fees, charges, and terms and conditions.

One way to strengthen the regulatory arm in Africa is by collaboration between policymakers from different countries. As such, they can deploy and enforce uniform regulatory guidelines which would encourage cross-border transactions and collaborations.

Closing Remarks

It is remarkable the steps that the African payments Sector has taken. The continent has been a frontier for mobile money development in the last few years. The convenience afforded by these payment systems has greatly accelerated the adoption of these technologies. For the most part, this unprecedented growth is only curbed by the boundaries of a country and a non-existent regulatory framework. 

However, there are some possible solutions to these problems. A collaborative effort between regulators could establish a technology-neutral regulatory framework that would guide future policies. The main job of these regulators is to protect consumers and establish a fair operating environment. Either way, the African payment sector is expected to grow with new technologies like cryptocurrencies seeing more adoption each day.