Bank of Ghana Governor Dr. Ernest Addison has said there is no better time than now for Africa to revisit the issue of scaling-up interoperability, in a bid to deepen financial inclusion and intra-Africa trade.

He said the high prevalence of mobile devices, mobile money penetration and increased Internet connectivity offer an opportune window to scale up interoperability – the degree to which a software system, devices, applications or other entity can connect and communicate with other entities in a coordinated manner without effort from the end user – on the continent.

He noted that mobile money interoperability remains a critical payment market infrastructure that can boost cross-border payments on the continent, in line with the African Free Continental Trade Area (AfCFTA).

He noted that mobile money has so far proven pivotal in fostering financial inclusion in Ghana and other African countries, hence it is advisable a significant push be made to enhance mobile interoperability across African countries.

The Governor further called for concerted efforts from all stakeholders in creating an ecosystem conducive for interoperability to address the region’s specific challenges.

“Few initiatives toward fostering mobile money interoperability at the intra-Africa level have been attempted in the past. However, lack of a collaborative approach and divergence in the developmental levels of national payment systems across Africa – notably lack of regulatory frameworks’ harmonisation in the payment systems including the payments service provider (PSP) licencing requirements, know your client/customer due diligence frameworks, financial and consumer protection provisions, financial dispute resolution processes, foreign exchange access and reporting regimes, data protection and cross-border sharing – have led to untimely failures. Hence, overcoming these roadblocks requires concerted efforts,” Dr. Addison said.

He made this call at the Africa Prosperity Dialogues (APD) 2024. He spoke on the topic Scaling up Mobile Interoperability to Deepen Financial Inclusion and Intra-African Trade.

Way forward

He said scaling up mobile interoperability across African nations calls for a review of legacy payment infrastructures, better policy coordination among member-countries, effective public-private and joint international collaborations that leverage new technologies such as cloud-based infrastructure, distributed ledger technology (DLT) and regulatory sandbox initiatives.

“The way forward is for African countries to leverage on the large technological savvy and youthful population in shaping the future of payments to drive financial inclusion, intra-trade activities and promote economic growth overall.

“These developments present an opportunity to transform the continent’s payment landscape in a way that removes barriers for cheaper and more convenient cross-border transfers, as well as reduced settlement times. Whie this is almost a unanimous consensus belief, the challenge has been to decide on the best approach to achieving such a feat,” he added.

He indicates that though the Pan-African Payment and Settlement System (PAPSS) has been established to enable efficient and secure financial transactions across African borders and supports interoperable transactions, the main challenge is only a handful of African countries have achieved full interoperability – which limits ability to fully maximise the opportunity presented in scaling mobile money interoperability.

“This brings up pertinent legacy challenges that need to be addressed in this direction; prominent among which are inadequate payment infrastructure and inconsistent compliance, status of the regulatory frameworks, policy coordination, user education and security & fraud concerns,” the Governor says.

According to a McKinsey & Co. report on ‘The Future of Payments in Africa’ (2022), Africa’s e-payments industry across domestic and cross-border payments generated approximately US$24billion in revenue for 2020 – of which about US$15billion was domestic electronic payments.

Despite this, on average only 5 to 7 percent of all payment transactions in Africa were made via electronic or digital channels – compared to 50 percent or more in Turkey. This implies that e-payments have the potential of being a major growth pole for Africa, especially as convenience and scalability of payment methods improve and supportive infrastructure develops.

Africa’s longstanding strategic objective has been regional integration, and over the years various initiatives have been pursued by existing regional blocs to offer interoperable payment systems that facilitate trade. However, market fragmentation persists with a range of non-tariff barriers that increase the cost of transactions and limit cross-border trade.