Africa Mobile Money: Ensuring Compliance with Digital Payments

In the past ten years, the financial services sector has seen the strongest returns and growth in Africa, and the field of Mobile Money has drawn more investment than any other. Although no continent has been an exception, the domestic and cross-border mobile money payments in Africa produced roughly $24 billion in income in 2020, of which about $15 billion came from domestic transactions. 47 billion unique transactions totalling well over $800 billion in transaction values contributed to the $15 billion in domestic electronic payments income. Yet, compared to 50% or more in Turkey, for example, just 5 to 7% of all payment transactions in Africa were done via electronic or digital channels.

As a result, e-payments provide a significant development opportunity for the continent, particularly as supporting infrastructure grows and payment systems’ comfort and scalability increase.

Since 2000, e-payments in Africa have grown rapidly, and during the COVID-19 epidemic, they advanced significantly as they did globally. Over the past two years, e-payments have grown at an unprecedented rate in many African nations. For example, the Central Bank of Nigeria reports that the volume of mobile money transactions in Nigeria doubled to about 800 million in 2020, and data from South Africa reveals that during lockdowns in 2020 and 2021, online sales increased by about 40%. 

With 84 percent anticipating e-payments to expand by at least 30 percent per year through 2025, most respondents (almost 80 percent) to McKinsey’s study of payments specialists in Africa anticipate that the move to e-payments not only will continue but will accelerate. One-third of respondents anticipate an annual rise of 50%. 

How Technology is Driving the Adoption of Mobile Money in Africa

The trajectory of e-payment in Africa is influenced by four significant forces that work in conjunction to shape the landscape of the continent’s payments system. The first two forces are favorable demographics and economic growth, which create a fertile ground for growth in e-payments. As the youngest continent globally, and with the fastest population growth rate, coupled with an urbanized youthful population, the future of e-payment in Africa is bright. Technology innovation and payments infrastructure developments represent the second and third forces, respectively.

The expansion of mobile phone penetration across Africa has given rise to an increase in alternative payment methods available to consumers, leading to more card-linked digital wallets and QR code payments. Additionally, payments infrastructure investments in real-time payments infrastructure have helped accelerate electronic payments both domestically and across borders. Lastly, the impact of newer disruptions such as digital currencies and open banking is shaping the future of payments but is harder to predict. However, with the development of transformative solutions such as the Pan-African Payment and Settlement System (PAPSS), there is hope for improved cross-border payments across the African continent.

Mobile Money and AML Compliance in Africa: Key Challenges and Solutions

The majority of African regulators are working towards creating a level playing field and promoting financial inclusion by reducing cash usage and enhancing the stability of their countries’ financial systems. In recent years, several countries have introduced comprehensive data protection guidelines and established regulatory sandboxes to facilitate innovation. However, the speed of innovation may be slowed down by lengthy licensing processes, a lack of industry-wide data, and rigorous banking rules. Nevertheless, regulators can play a critical role in shaping growth in the following ways:

Modernizing know-your-customer requirements and open-banking regulations to steer more consumers towards e-payments.
Digital KYC regulations and support for open banking could be among the most effective steps to enhance the pace of innovation and create new types of players and offerings.

Collaborating across borders to improve cross-border payments.
Cross-regulator collaboration is vital to address the challenges associated with intra-Africa cross-border payments. For instance, the PAPSS initiative aims to accelerate the substitution of traditional correspondent banking and intermediary structures with faster and cheaper alternatives. However, such initiatives can take time to materialize, as demonstrated by the Economic Community of West African States’ quest to introduce a regional currency, the ECO, since 2003.

Streamlining regulation across jurisdictions to accelerate the pace of innovation.
Regulatory frameworks that safeguard consumers and the financial system like AML, need encouraging innovation that are crucial for deepening financial inclusion and enhancing the migration to e-payments. Adopting a global or pan-African perspective on local regulatory sandboxes, particularly in fintech hubs, could significantly boost the pace of innovation.

How IDcentral’s AML KYC solution can help

IDcentral is revolutionizing the mobile money industry by offering powerful compliance solutions that help mobile money providers meet their KYC compliance and AML screening requirements. By leveraging IDcentral’s compliance solutions, mobile money providers can achieve better compliance outcomes, reduce the risk of fraud and money laundering, and provide a more secure and convenient customer experience.

KYC Compliance: IDcentral’s KYX solution is designed to be fast, efficient, and easy to use, allowing mobile money providers to onboard new customers quickly and securely. With IDcentral’s advanced identity verification capabilities, mobile money providers can ensure that their customers are who they claim to be and meet all regulatory requirements.

AML Screening: IDcentral’s AML screening solution is highly accurate and efficient, enabling mobile money providers to quickly identify and flag any suspicious transactions. With IDcentral’s cutting-edge technology, mobile money providers can significantly reduce the risk of money laundering and comply with regulatory requirements.

Benefits of IDcentral’s Compliance Solutions: By partnering with IDcentral, mobile money providers can benefit from a range of powerful compliance solutions that improve the customer experience and help to ensure regulatory compliance. IDcentral’s solutions are designed to be scalable and flexible, making them ideal for mobile money providers of all sizes. Additionally, IDcentral’s compliance solutions can be customized to meet the unique needs of each mobile money provider, ensuring that they get the exact solution they need.

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