The complexities of getting funds to the people who need them during a crisis
When a crisis hits, it’s paramount that everything that can be done to help communities recover is done.
However, issues around local liquidity challenges can restrict vital funds being received by those most in need. Access to funds may be limited by a lack of payment channels, expensive rates that syphon off large chunks of the money intended for aid, and fraud due to limited verification processes.
Furthermore, in a crisis, time is of the essence and many secure payment channels can take days. However, the innovative approaches of the payments sector are driving a transformation towards increased connectivity and quality of service across markets in both the Global North and Global South.
The importance of digital innovation
It will come as no surprise that ‘digital’ is still the word on everyone’s lips in emerging markets specifically. Over the past few years, digital payments have overtaken traditional banking methods that have proven themselves unfit for purpose and have experienced a surge in volume and adoption as a result.
The African payments industry, for example, is being reshaped by a confluence of factors, from increasing ambitions for regional trade integration to ongoing social and political challenges such as Covid-19.
The continent has already proven its readiness for fintech. It has long led the way in mobile payments and innovation due to it having one of the highest mobile phone penetration levels in the world. In fact, mobile money transactions boomed globally in 2020, especially in sub-Saharan Africa, which accounted for 43% of all new accounts, according to the GMSA Association.
However, making domestic and cross-border payments in emerging markets is not as easy as it should be. This makes it incredibly difficult to send, receive or save money, as well as access credit and financial advice.
There is a high prevalence of feature phones which go beyond making calls and sending messages to offer some advanced features, such as accessing the internet and basic apps, but do not have the advanced operating systems seen on smartphones.
Therefore, many of the banking apps created in developed countries where smartphone penetration is high simply aren’t suitable in these markets. Tech solutions have to work for the local context.
Take Mowali. The mobile wallet providers’ huge success and vision helped to demonstrate how enormous the potential for payments is in sub-Saharan Africa. The MTN Group and Orange’s 2018 launch of Mowali to enable interoperable payments across Africa provided the optimal environment in which the mobile money industry can thrive.
By allowing users to seamlessly send money between accounts and across different providers, Mowali successfully reduced costs of transfers and enabled a wider reach for mobile money users, especially businesses – necessary features to further remove limits on financial inclusion.
13 years after the launch of mobile money transfer service M-Pesa in Kenya, there are now nearly 200 million consumers subscribed to popular mobile money services in Africa, including Paystack and MoMo.
A sector looking forward
There is a feeling across the industry that we do not want to lose the pace of innovation that fintech has catalysed over the last decade. The adoption of digital services and the increased effort by regulators and governments to facilitate these alternative financial services has been ground-breaking.
Moving money where it’s needed quickly, reliably, and cost-effectively is more important than ever, particularly in emerging markets, where fintech advances will significantly improve financial inclusion and access.