In an interview with this publication two years ago, you warned that the risks of delaying upgrading to digital payments outweigh the issues for financial institutions in making the shift. Has this warning been heeded, in your opinion?
Africa is a continent, not a country, with multiple dynamics that impact the ratio of the banked population in each country, which have various levels of maturity when it comes to financial inclusion. However, overall it has a large unbanked and underbanked population with only 49% of adults owning a bank account in SSA – a rate that has doubled since 2011, but significantly lagging behind the global average of 76%.
There is also a great deal of variation in bank account ownership in various countries, ranging from 6% in South Sudan to 91% in Mauritius.
Within the financial industry, one can observe both the front-runners in the shift to digital payments as well as those lagging behind. Front-running financial institutions have launched initiatives focused on enhancing digital platforms, integrating with mobile money services, leveraging fintech partnerships, and adopting innovative technologies to provide secure, efficient, and accessible financial services.
Network International’s stated purpose is to help economies and businesses grow by simplifying payments and commerce. How have you progressed, in respect of this ambition?
Indeed, Network firmly believes in the economic potential of Africa and this drives our purpose of helping economies and businesses grow by simplifying payments and commerce.
The investments we’ve made over the last few years support Africa’s progress in its financial inclusion objectives, accelerating the transition from cash to digital payments and thereby accelerating GDP growth.
The process covers the two key levers in digital payments: ‘Make payments’ (issuing) and ‘Take payments’ (acceptance). We are making digital payments economically feasible for banks, FIs, MNOs and fintechs as well as merchants through cost-efficient payment solutions. As a result of these investments, we can offer innovative solutions that drive revenue and profitability to our customers.
We put customers at the heart of everything we do. One illustration of this is that we bring localised solutions to market – for instance, we have partnered with domestic schemes like Meeza in Egypt to enable our customers to issue and accept Meeza cards.
We engage with our clients regularly to understand their requirements. This year, we are organising a payments innovation roadshow in over eight countries to introduce our clients to our new solutions and also discuss trends in the payments industry.
We have moved fast. Barely 18 months after our acquisition of DPO, an African e-commerce provider, we announced a R500m investment in the Network One platform in South Africa, followed by an additional R60m investment in a payment switch (an online payment transactions routing and authorisation system).
Network International has announced an investment of over E£1bn in Egypt to enhance our technology platform and expand our local talent.
In terms of scale and market leadership in Africa, we have recently partnered with some of the leading pan-African banks such as Ecobank, and MNOs such as MTN and Airtel. We build better every day, for example we offer over 75 APIs and continue to add to the list. We can onboard a new customer in less than two months.
The Covid-induced lockdowns dealt a serious blow to Africa’s cash-based transactions system. Are more financial institutions on the continent now ready and willing to go digital?
Indeed, the pandemic significantly accelerated the shift towards digital payments in Africa, compelling financial institutions to adopt and expand their digital services. The enforced lockdowns highlighted the limitations of cash-based transactions and underscored the importance of digital financial solutions.
Here are some ways financial institutions in Africa have responded and examples of their readiness and willingness to go digital: Many banks have invested heavily in enhancing their digital channels, including mobile banking apps, internet banking platforms, and USSD services, to cater to the increased demand for cashless transactions. The mobile apps include biometric authentication, instant payments, and bill payments catering to the needs of digital-savvy customers.
Financial institutions are offering a wider range of digital services, such as instant loans, savings products, fund transfers and investment options, through digital platforms.
Some banks have introduced virtual banking services, allowing customers to engage with banking representatives via video calls, reducing the need for physical branch visits.
One of our main purposes is to increase financial inclusion – as I stated earlier, the ratio of financial inclusion in Africa is the lowest in the world. Going digital is helping to redress the balance. For example, banks are increasingly partnering with mobile money providers to extend their reach to unbanked and underbanked populations. This facilitates seamless transactions between bank accounts and mobile wallets.
Digital KYC processes have made it easier for people to open and manage bank accounts remotely, increasing financial inclusion.
We have also seen a welcome adoption of innovative technologies to simplify and streamline financial transactions. Banks are collaborating with fintech companies to leverage innovative technologies like artificial intelligence, and machine learning to enhance their digital offerings.
Some banks are working with fintechs by organising annual fintech challenges, such as the Ecobank FinTech Challenge, or running incubation centres to develop digital financial solutions, such as the Zenith Innovation Hub, Stanbic IBTC’s Blue Lab and others.
The adoption of contactless payment solutions, such as QR codes and NFC technology, has gained momentum, reducing the need for physical cash.
Africa is composed of 54 very different countries, with different levels of development and different legacy cultures. How do you tailor your approaches to suit each entity?
We serve customers in over 40 African countries using a hub and spoke approach. We have regional hubs in Egypt, Nigeria, Ghana, South Africa and Kenya.
In FY 2023, there were 69 nationalities represented across our workforce. We are taking active steps to recruit from all sections of society to grow our diversity.
This enhances our ability to adapt to local regulations and in fact gives NI competitive advantage in our markets. For instance, data-handling and localisation regulations are constantly changing, so Network International continually reassesses them. Keep in mind that although data localisation regulations across countries have a variety of rationales, the IT and data landscape challenges are often very similar. Companies that figure out how to move seamlessly across countries, while complying with local requirements, will enjoy significant rewards.
That said, while the advantages of reducing risk through compliance with localisation regulations are real, they are defensive in nature. More compelling are the upside benefits of getting localisation right. These include an optimised customer experience across markets, enabling rapid innovation by using larger and more diverse data sets.
In addition, by developing a repeatable data localisation approach, a company can move efficiently from one geography to the next, thus lowering costs, and companies can boost their reputations and win new customers by positioning themselves as guardians of customer data and dependable sources of information about digital identity and data privacy.
The African Continental Free Trade Agreement (AfCFTA) has in theory opened up a vast market of over a billion people but business transactions are still slow and cumbersome. How is your company helping to accelerate and simplify payments across the region?
We’re doing our part by partnering with pan-African banks, MNOs and fintechs and helping single country players to expand to more countries.
Network International is significantly contributing to the acceleration and simplification of payments across Africa by developing robust payment infrastructure, enhancing security measures, offering innovative solutions, fostering partnerships, building capacity, and maintaining a strong local presence. These efforts help reduce the complexities and inefficiencies in business transactions, thereby supporting the goals of the AfCFTA and driving economic growth in the region. For example, Network International provides advanced payment platforms that facilitate secure and efficient transactions. These platforms support a variety of payment methods, making it easier for businesses to operate across borders.
In addition,by integrating with both local and international payment systems, Network International ensures seamless transactions across different regions and currencies, reducing the friction in cross-border trade.
Network International also invests in advanced security technologies to protect transactions from fraud and cyberthreats. This builds trust among businesses and consumers, encouraging more frequent and larger transactions.
By adhering to international and local regulatory standards, NI helps businesses navigate the complex regulatory landscape of different African countries, ensuring compliance and reducing the risk of legal issues.
Recognising the high mobile penetration in Africa, we support mobile and digital payment solutions that are accessible to a large portion of the population.
Network International also offers e-commerce solutions that enable businesses to accept online payments securely and efficiently, opening up new markets and customer bases across Africa.
By partnering with fintech companies, neo-banks, and conventional banks, we can leverage their strengths and expand their reach. These partnerships enable the development of innovative financial products and services tailored to the African market.
We also provide tailored solutions for startups, which are critical for economic growth under the AfCFTA. These solutions include affordable transaction processing fees, easy integration, and scalable payment options.
A very important aspect of our approach is to offer consulting to our customers to help them understand and effectively use our payment solutions. This empowers customers to optimise their payment processes.
Along similar lines, by providing our customers with insights and analytics on transaction data, Network International helps them make informed decisions, optimise operations, and better understand market trends.
In response to your earlier question of how we customise our approach to such a diversified market as Africa, we ensure we have a strong presence in multiple African countries, and NI benefits from local expertise and understanding of the unique challenges and opportunities in different markets. This allows for more tailored and effective payment solutions. Thus NI focuses on the specific needs of its customers, ensuring that their payment solutions are user-friendly, reliable, and efficient.
Mobile operators, fintechs and neo-banks, together with conventional banks, are all in the payments mix. How easy or difficult is it to deal with each grouping?
The payments experience of our talented team and our robust technology enables us to add value to each of these stakeholders. For example, mobile operators have a large customer base, especially in regions with low banking penetration, and are keen on expanding their service offerings using our advanced payments services. The advantage of fintechs is their speed and agility. They can quickly adapt to new technologies from Network International and market demands. However, fintechs often operate in rapidly evolving regulatory environments, which can be complex to navigate.
Neo-banks are digital-first, making them easier to integrate with our payments platforms. Their ambition to gain market penetration from incumbents using advanced payments solutions forms the basis of our partnerships: Neo-banks are still gaining market share and may not yet have the customer base or trust levels of conventional banks.
Conventional banks have well-established systems and processes, making integration with their payment systems relatively straightforward. They have extensive experience in regulatory compliance, which can streamline compliance efforts for a payments processor. They offer comprehensive financial services, providing a broad base for various payment processing needs. However, many conventional banks operate on outdated technology, which can complicate integration and slow down innovation.
Financial crime is estimated to cost Africa around $4bn annually. How does Network International address this threat?
As part of its payment processing business, NI offers fraud management solutions to a variety of clients, ranging from fintechs to traditional and large multinational institutions.
Considering the continuously evolving nature of fraud and increased regulatory scrutiny on issuers, it is imperative for banks and fintechs to establish a robust strategy, processes, technology, and resources to prevent financial and reputational losses.
Deploying an on-premises fraud management solution becomes a complex, challenging, time-consuming, and costly endeavour for banks and payment solution companies. This process requires investments in technology, environment, resources, and processes, including hardware and infrastructure readiness, procuring and deploying third-party software, managing and utilising data and analytic tools, and training and upskilling resources to handle the ever-evolving anti-fraud strategies, cutting-edge enterprise fraud prevention technology and anti-fraud operations.
To overcome this challenge, Network has been offering FICO Falcon Fraud Manager as a hosted solution to banks in the MEA region. This solution combines FICO’s analytical capabilities with Network’s expertise in managing payments technology and anti-fraud operations on an enterprise scale.
The banks gain complete flexibility in choosing the channels they want to integrate, deploying the solution in phases and scaling their operations according to business requirements, fraud perception and regulatory priorities.
In addition to managing the anti-fraud application, environment, network and integrations with clients’ payment systems, Network also provides continuous analytics and rule management services and 24/7/365 fraud monitoring operations carried out by a dedicated team that work on case investigations and disposition across the geography of our business operations.
In summary, Network’s hosted fraud management solution has successfully resolved a complex puzzle for over 40-plus clients who have entrusted us with the end-to-end responsibility of managing fraud across payment channels on their behalf.
Network’s fraud management as a service isn’t limited to issuers hosted on our payment processing platform but also extends to issuers with other external or in-house payment processing cores. Moreover, we’ve sought to address the unmet need of banks, which was to use a single platform for preventing and detecting fraud across both card (debit, credit, and prepaid) and non-card (retail banking, corporate banking, alliance banking, and others) product portfolios.
Network has helped its clients reduce their Fraud Basis Points (FBPs) by 82% in 2022 and increased detection rates by 25%.
Through the Network Falcon offering, we have successfully integrated Falcon for 40 clients who have outsourced payment services to Network and are utilising the fraud platform for the fraud prevention as a service.
Falcon is now live for an impressive 20m-plus customers, processing more than 180m transactions amounting to $18bn of sales and payments on their cards, accounts and wallets across the MEA region.
Notably, with a review rate of 1.13%, we have saved a substantial amount of fraud losses, aggregating to $9.7m, which provides 7.45x RoI to our clients as at YTD October 2023.
We are living in an age of polycrisis, including rising costs of living, climate change attrition, disrupted supply chains and rising national debts. How can the use of technology help us resolve some of these issues?
Digital payments can address global challenges such as these through various mechanisms:
Digital payments streamline transactions, reducing the need for physical infrastructure and manpower, which lowers operational costs for businesses. These savings can be passed on to consumers, helping mitigate the rising cost of living.
A study by McKinsey found that digital payments could add $3.7tn to the GDP of emerging economies by 2025, with a large portion of this coming from lower transaction costs and increased financial inclusion.
By providing access to financial services for unbanked and underbanked populations, digital payments enable broader participation in the economy, enhancing income opportunities and financial stability.
Digital payments reduce the need for physical cash and paper receipts, decreasing the environmental footprint associated with paper production and waste. For example, Visa estimated that the production and transportation of cash and cheques generate about 1.5m metric tons of CO2 annually in the US alone.
Digital payments enable businesses to quickly adapt to changing circumstances by facilitating rapid transactions and alternative payment methods, ensuring continuity in supply chains. During the pandemic, digital platforms saw increased usage, helping businesses maintain continuity despite disruptions.
Digital payments enhance the transparency and efficiency of tax collection, reducing evasion and increasing government revenues. This can help manage and reduce national debts. In India, the introduction of the Unified Payments Interface (UPI) has significantly increased digital transactions, with over 38bn transactions worth $940bn in 2021 alone.
Governments can use digital payments to distribute welfare benefits and subsidies more efficiently, reducing administrative costs and leakage. The Indian government’s Direct Benefit Transfer system uses digital payments to distribute subsidies and welfare benefits directly to beneficiaries, reducing leakage and saving an estimated $13bn annually in administrative costs and fraud.
Africa is a young continent demographically – with 60% of the population under 25 – and the youth are very digitally literate. Does this aspect help financial institutions to make the switch?
The youthful and tech-savvy population in Africa is a critical enabler for the transition to digital payments. The high mobile penetration rates, entrepreneurial spirit, improving infrastructure, and targeted education and awareness campaigns are creating a conducive environment for digital payment solutions.
Financial institutions can leverage this demographic advantage by developing user-friendly, mobile-centric payment solutions and continuing to invest in digital literacy and infrastructure. This synergy between a young, tech-savvy population and innovative financial solutions can accelerate the switch to digital payments, fostering financial inclusion and economic growth across the continent.
The widespread use of mobile phones among Africa’s youth supports the adoption of digital payment solutions. The GSMA has forecast that the mobile penetration rate in sub-Saharan Africa will grow from 86% in 2022 to 99% in 2030.
According to the GSMA, in 2023, there were over 489m unique mobile subscribers in sub-Saharan Africa, and smartphone adoption – as a percentage of connections – is expected to grow from 51% in 2022 to 88% in 2030.
The number of active mobile money accounts (90 day) increased 1.6 times during 2020-23, from 200m to 337m, according to the GSMA. Mobile money transactions increased 1.3 times over 2020-23, from $62tn to $81tn.
Mobile money has significantly increased financial inclusion. For example, before M-Pesa was launched in 2007, only about 26.7% of adults in Kenya had access to formal financial services. In 2023, over 83% of the adult population in Kenya used mobile money services, primarily M-Pesa. In many countries, the growth of mobile money has outpaced the growth of bank accounts.
The GSMA’s recent report forecast that if Ethiopia experiences high adoption rates for mobile money, as in Kenya, Ghana, and Uganda, it could lift 700,000 people out of poverty, contribute $5.3bn to GDP, increase tax revenue by $300m, and provide a safety net for almost 40% of households.
Africa’s entrepreneurial ecosystem is thriving, particularly in the fintech sector. According to Disrupt Africa, between July 2021 and July 2023, African fintechs attracted $2.7bn in venture capital. Africa was home to around 1,000 fintechs in 2023, with around 50% having been founded since 2017, according to BCG. Young, tech-savvy entrepreneurs are driving this growth, developing innovative digital payment solutions.
The improvement of telecom infrastructure and internet penetration facilitates digital payment adoption. In sub-Saharan Africa, the percentage of the population not having access to mobile internet reduced from 46.1% in 2015 to 15.4% in 2022, with continued growth expected, driven largely by the youth.
Internet penetration in Africa reached 37% in 2023, according to the ITU. The expansion of 4G networks (adoption as a percentage of connections is expected to increase from 22% in 2022 to 49% in 2030) and the introduction of 5G (adoption as a percentage of connections is expected to increase from 0.2% in 2022 to 17% in 2030) are expected to further boost digital payments adoption.
The rise of digital platforms like social media and e-commerce is driven by young users. These platforms often integrate digital payment systems, further normalising their use. Jumia, Africa’s leading e-commerce platform, reported that its payment service, JumiaPay, saw over two million transactions in Q1 2024, a 52% YoY growth.
By leveraging mobile technology, digital wallets, and innovative banking apps, banks have enhanced financial inclusion and provided convenient, efficient services that align with the preferences of young consumers.
This shift to digital payments is crucial in addressing challenges such as financial inclusion, economic growth, and efficient transaction processes in Africa. For example, Equity Bank launched Equitel, a mobile banking service, in partnership with telecom operator Airtel.
You have introduced WhatsApp Business services to Africa. What does this facility do?
With our bespoke customer engagement solutions,you can now expand and improve your customer service and meet your customers on WhatsApp. Financial institutions, fintechs can delight their customers while reducing overheads. The services range from simple, rule-based chatbots to conversational, AI-powered chatbots able to support your customers by providing important information instantly.
Your agents can provide the very best customer interaction with everything in one place using a cloud-based, scalable contact centre solution.
Organisations can manage customer conversations and keep context, all from a single agent interface, and enable agents to understand customers better and act on real-time customer sentiment.
How do you see the next decade for both NI as well as Africa?
Network will continue the approach of making investments in multiple African markets, both in technology infrastructure and people. This is based on Network’s firm belief in the economic potential of Africa, and Network’s purpose to help economies and businesses grow by simplifying payments and commerce.
The investments will support Africa’s progress in financial inclusion objectives and accelerate the transition from cash to digital payments, thereby accelerating GDP growth. We are making digital payment acceptance economically feasible for many small merchants through low-cost payment acceptance solutions. The investments will offer innovative solutions that drive revenue and profitability to our customers.
Network now has a diverse client base, expanding the customer base beyond traditional banks. Our strategic focus on fintech and MNO segments has started yielding results.
Network will continue to strengthen its digital payments capabilities in Africa, introducing solutions for new use cases such as ‘fintech in a box’ and companion cards for mobile money. We are committed to analysing the unique preferences of the payments industry in Africa. We will partner with fintechs, governments, financial institutions and telecom operators to develop market-relevant solutions.
New services include expanding our N-Genius online payments platform’s regional footprint for financial institutions for online acquirer processing services; the platform is now live across 26 African countries.
Network successfully launched direct-to-merchant services in Egypt. This builds on Network’s already well-established presence as a processing services provider for banks in Egypt.
Network is determined to comply with local regulations (for example, the Payments Systems Act in Nigeria, Ghana, Egypt and South Africa), which require service providers to be on the ground and process cards issued in a country by having a domestic processing presence.
Network International has demonstrated its ability to adapt to a variety of data localisation rules. We are applying our localisation playbook in Southern Africa, with South Africa as the hub of our operations in the region.
Our local deployment in South Africa provides an excellent foundation for future growth in the Southern Africa region. This will unlock revenue opportunities and enhance our competitive positioning by aligning with new regulatory legislationsto better serve customers in the region.
Network’s presence in Ghana enables usto serve all types of customersincluding the 15 banks in the country, all card schemes, and other third-party processors who decide to co-locate their services on the company’s infrastructure.
As mentioned, Network serves clients in 40-plus African markets using a hub and spoke model. We have regional technology hubs in Nigeria, South Africa, Kenya, Egypt, and Ghana.
Network continues to invest in growing its ground-level presence in several markets and customising solutions for Francophone countries such as DRC, Togo, Senegal, Cameroon and Côte d’Ivoire.
The outlook for Africa? Domestic payment schemes in African countries are in different stages of maturity, ranging from feasibility studies to rapid adoption. We expect these domestic schemes to accelerate the growth of digital payments on the continent, while advancing national interests and bringing efficiencies. Network is collaborating with regulators in the growth of domestic schemes, such as Meeza in Egypt, and GIM in Francophone territories.
Real-time payments infrastructure is expanding, with Nigeria already in the top 10 globally for real-time transactions in absolute terms. Other African countries are expected to experience rapid growth in this area.
There is a growing emphasis on sustainable payment methods, with fintech companies promoting environmentally friendly solutions like contactless cards and digital receipts. B2B payments are also gaining attention, with companies offering prepaid virtual cards for expense management and detailed data tracking.
The digitisation of B2B payments is expected to grow, addressing inefficiencies in expense management and providing better control and spend traceability.