The global payments arena is undergoing significant transformation, marked by disruption and novel innovations. Driven by technological advancements, there’s been a notable transition from conventional cash-based transactions to modern digital payment methods. In this wave of change, Africa is emerging as a focal point of exceptional growth. Projections suggest that between 2023 and 2030, the continent will be the fastest growing fintech market.
According to findings from Boston Consulting Group’s (BCG) 21st Global Payments Report indicate that total payment revenues globally grew at a yearly rate of 8.3% between 2017 and 2022, amassing an impressive $1.6 trillion by 2022’s end.
In the African fintech domain, South Africa is a dominant player, adding $10.3 billion to this worldwide revenue figure, with an annual growth rate of 6% since 2017. By 2032, it’s anticipated that the payment sector in South Africa will soar to $22 billion, mirroring the country’s strong upward momentum.
On a global scale, the report foresees a deceleration in revenue growth, slowing to an annual rate of 6.2% until 2027, eventually reaching a total revenue of $2.2 trillion. This decrease is primarily attributed to a shift in retail payments, favoring account-to-account transactions over traditional cards, alongside narrower profit margins for cards in specific markets.
In contrast, Africa stands out due to its unique operational landscape and abundant opportunities, with an expectation of sustaining double-digit growth rates.
An intriguing highlight from the report highlights the meteoric ascent of fintech companies with a payments focus. Presently numbering over 5,000 worldwide, these fintechs collectively contribute around $100 billion to the industry’s revenue.
Forecasts suggest that by 2030, these fintechs could amass an astounding revenue pool of $520 billion, heightening the competitive pressures faced by established industry players.
In the thriving fintech landscape of Africa, the leading six fintech hubs collectively host an impressive 681 companies. This continent is primed to outperform the global average, with revenue projections indicating a staggering 13-fold increase in growth.
Tijsbert Creemers, the Managing Director and Senior Partner at Boston Consulting Group (BCG) South Africa, underscores the remarkable impact and scale of disruption within Africa, setting it apart from more established economies. While trends may vary from one country to another, Africa is experiencing significant growth in the payments sector, marked by disruptive innovations and a rapid transition rate.
Creemers highlights Africa as a global focal point for payments, citing the impressive pace at which regulators, banks, and fintech companies have collaborated to facilitate novel payment solutions. These solutions not only unlock opportunities for the private sector but also play a pivotal role in advancing the economic development of the continent.
The surge of digital currencies stands out as a significant trend in the financial landscape. Over 90% of central banks worldwide are actively exploring digital currencies as a complement to traditional cash. This shift from the conceptual stage to practical implementation could result in the operational launch of both retail and wholesale central bank digital currencies in select countries within the next ten years.
Moreover, the report highlights the crucial role of technological modernization and the emergence of GenAI (Artificial Intelligence influenced by Generative Models) in the realm of payments. GenAI-powered software coding alone has the potential to enhance productivity by up to 20%, ushering in a transformation in product development and operational efficiency.
Nevertheless, in this era of transformation, regulatory scrutiny is on the rise. Regulatory authorities are expanding their rules and enforcement measures, rigorously assessing risk management and compliance practices across both traditional and non-traditional players in the payments industry.
As the landscape of payments undergoes continued disruption, industry leaders are encouraged to revamp their strategies, reconsider partnership structures, and modernize their technological infrastructure. Safeguarding shareholder value and embracing cost-efficiency will be paramount in sustaining and expanding shareholder value amidst this dynamic environment.