This paper examines the growth and challenges of digital payment adoption by retailers in Africa, including “contactless payment (QR codes, tap to pay) [and] buy-now-pay-later” services. The authors note four main prerequisites for merchant adoption: “digital payment infrastructure, legal and regulatory framework[s], access to mobile money platforms and a consumer due diligence framework” for performing know-your-customer (KYC) protocols. Among the challenges are lack of consistent access to electricity and that many countries’ payment system legislation not being updated frequently enough to keep up with innovations in financial technology.
The authors emphasized that female microentrepreneurs in sub-Saharan Africa face more challenges than men looking to accept when using digital payments, as they are less likely to own mobile phones. Women in the region are also less likely to have national identification cards, which poses an additional barrier for female microentrepreneurs seeking to enter the formal economy.
To reduce the challenges merchants face when attempting to adopt digital payments, the authors recommend central banks establish clear guidelines for payment routes that are more common in areas with poor connectivity, such as prepaid cards and unstructured supplementary service data (USSD). They also suggest that those national governments that have not done so already: (1) enact laws regarding cybersecurity and consumer protection for participants in electronic commerce; (2) update their national financial inclusion strategies to include female merchants as a target segment and; (3) collaborate to standardize their regulatory guidelines across borders while encouraging central banks to incentivize interoperability across digital payment systems.
This is summary of a paper by the African Financial Inclusion Policy Initiative (AfPI); published by the Alliance for Financial Inclusion (AFI); June 2023; 50 pages; available at https://www.afi-global.org/wp-content/uploads/2023/06/Driving-Digital-Financial-Services-in-Africa-Through-Merchant-Acceptance-of-Digital-Payment.pdf.
By Rohit Dayanand, Research Associate
Additional Resources
AFI homepage
https://www.afi-global.org
AfPI webpage
https://www.afi-global.org/activities/regional-initiatives/african-financial-inclusion-policy-initiative-afpi/
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