Ever since the Lydians – the ancient civilisation in Western Asia that first used coin-based monetary systems in the 5th century BC – we’ve been creating payments infrastructure that connects buyers and sellers.
By Sreekanth Kodumur, GM: banking and financial services at Wipro
The centralised system ushered in by the Lydians was a revolution – liberating us from inefficient, fragmented and regionalised barter systems.
Today, despite decades of refinement, the exchange of money is still hampered by high transaction costs, complex inter-bank arrangements, foreign exchange controls and more. Even the simplest domestic transactions can still take a few days to clear.
New digital technologies however, have the potential to reshape the way we pay for goods and services, making the flow of value far more fluid and instantaneous – crossing borders and compressing timeframes. The impact could be as revolutionary as the gold and silver coins first circulated by the Lydians centuries ago.
So, just what are the biggest technology trends set to revolutionise payments in Africa?
Mobile payments and mobile banking converging
South Africa’s tryst with on-the-go mobile banking will continue to unfold, as these apps grow in sophistication, supporting both Electronic Funds Transfer (EFT)-based bank payments as well as card-based payments. In fact, services such as ‘contactless’ Near Field Communication and virtual cards will start to blur the lines between mobile banking and mobile payments.
We’ll also see a significant increase in payment features being woven into the design of mobile apps and services. If Amazon’s early success may have been buttressed by its famous one-click payment feature, the likes of Google Play and Uber took this one-step further – with a no-click approach. Here, the payment is automatically processed, embedded as an invisible step into another activity that you’re doing (such as ordering a taxi for instance).
New peer-to-peer services connect our individual financial worlds
The concept of peer-to-peer (P2P) financial services will continue to gather momentum in the coming years, as the likes of P2P lending and P2P insurance become mainstream. Handy apps will help us to more easily split the bill at the end of a group restaurant meal or help us to save as a community – digitising the South African tradition of ‘stokvels’ – according to Wikipedia, a savings or investment society to which members regularly contribute an agreed amount and from which they receive a lump sum payment.
We’ve become accustomed to sending airtime to one another – remotely, instantly and with zero transaction fees. Though this may have been originated by cellular operators, banks will be asked to follow suit, as consumers demand frictionless services for micro-payments and indeed even larger transaction values.
Digital forex and payments solutions serving uniquely African needs
Over the coming years, expect to see new mobile payment apps enabling cashless, low-fee transactions between consumers and retailers as institutions across Africa look to technology to stimulate more cross-border trade corridors.
In the business-to-business space, we’re already seeing new disruptive services such as the Bitpesa platform – simplifying cross-currency payments between countries and paving the way for simpler imports and exports. There is huge scope for growth in this area, as more businesses see the benefits of embracing digital payment services such as Bitpesa.
Digital currencies find their place and their purpose
So far we’ve seen a strong focus on the market valuation of Bitcoin and the various alternative coins, as people are drawn in by the ‘get rich quick’ allure. This surface-level exuberance will cool off, as the valuation establishes itself, to be replaced by deeper conversations about how digital currencies can be used to pay for more goods and services, reduce transaction costs and barriers and increase liquidity in our financial systems.
Biometric authentication pulls everything together
Increasingly, we’ll see the evolution of concepts such as ‘Augmented Identity’, as we shift away from passwords, PIN codes, token generators, signatures and the like. These will be replaced by something natural, and very difficult to forge – such as fingerprints, iris scanners, or voice biometric services.
Whether we’re banking via an app, shopping on the web, or ordering something from our voice-controlled Alexa device- we’re expecting bullet-proof solutions, but we also want the experience to be frictionless. Biometrics holds the promise of addressing both the ‘security’ and the ‘convenience’ demands placed on financial services players in the future.
With payments infrastructure so foundational to our continent’s economies, expect to see big changes over the coming years as governments, financial services companies and other businesses start to explore the limitless opportunities of digital.