Interoperability is Key to a Humongous Change in Payments, Says Ecobank Consumer Payments Head

Solving payments interoperability is that “one thing” that needs to change for the digital opportunities inherent in Africa to reach its full potential, Osahon Akpata, head of consumer payments, Ecobank Transnational, told PYMNTS. He said interoperability between the switches in the different regions — and between payment providers such as banks, FinTechs and mobile money operators — will simplify the exchange of money and trigger a “humongous” change in payments.

And connecting the various national and regional switches would be the simplest way to achieve this, capitalizing on the African Continental Free Trade Area (AfCFTA) agreement. Trading under the AfCFTA commenced earlier this year, with a goal to create the world’s largest single market for goods and services. Payments will undoubtedly be central to its success, and guaranteeing a smooth trading process between 55 countries with different financial and monetary systems will be key.

“Imagine Nigeria’s interbank settlement system connected to Rwanda’s switch, and to Ghana’s switch, and so on. This will enable the vision of AfCFTA to come to life much more quickly,” said Akpata, who has spent the last five years at Ecobank, one of the leading financial institutions (FIs) on the African continent, with operations in 35 countries across the region.

He said that a lot of progress has been made, and in the next five years, there will be a stronger interoperable system and more trust developed in those networks. “And that could lead to millions, or hundreds of millions, of new entrants into the financial sector, as we make it easier for consumers to access payments and financial services.”

Somewhat Super App

When it comes to developing super apps, Akpata said that banks have a responsibility to leverage their data and insights to build solutions that meet the needs of their customers to a high degree.

“Indeed, it’s good business to go beyond financial services and provide comprehensive value propositions that meet our customers’ lifestyle needs,” Akpata said, but added that the market for super apps should be approached with caution. “How many downloads do they get, even when they’re adding other services like music or movie tickets onto their apps?” he asked in reference to institutions that have released super apps in the past.

Moreover, given the capacity of low-cost smartphones used primarily in developing regions, the size of a super app can be a limiting factor — not to mention the amount of data required and its associated cost to consumers. It also requires a certain amount of in-house expertise and a dedicated team of partners who can deliver these additional services — so ultimately, banks need to decide whether it’s worth the investment, Akpata explained.

Ecobank decided on a different approach, removing an important feature from the bank’s main Unified Mobile App, which is used across 33 African countries. The RapidTransfer feature is now available as a separate app, allowing instant funds transfers between users in different countries.

“So that is perhaps the opposite of having a super app, where we’re going to have an individual app just for sending money between African countries,” Akpata explained. And that plan has worked well, giving non-Ecobank customers access to an innovative product for instant movement of funds between different countries.

Trends to Watch

Rewards associated with card programs have been common practice in Europe and the U.S., where interchange fees are much higher than in developing markets like Africa. And Akpata said that the billion-dollar global rewards market, which includes cash back, miles and points, is starting to gain traction in developing regions.

“In developed markets, large merchants keep pushing the merchant service fees down, so there’s not very much [left] for the payment providers to spend on rewards for the customers” even if they are in high demand, he explained.

But even though the model is not very sustainable in those markets, “we can expect to see more rewards being offered as competition intensifies among payment providers in Africa, with discounts and perks tied to wallets and mobile payments, in collaboration with consumer product companies, delivered to consumers in real time.”

Virtual currencies are also a must-watch, and given the compelling benefits of security and low costs, Akpata said, “there’s no way of avoiding blockchain technology as we explore the future of payments on the [African] continent.” However, the controversy around the speculative nature of cryptocurrencies will require some time to unravel as regulators examine different ways to protect consumers.

That said, countries like Nigeria and Ghana are already making plans to launch their central bank digital currencies (CBDCs) in the coming months, a sign of things to come. “We can expect that the different and compelling use cases that blockchain brings to payments will lead to several innovations on the continent, as a multitude of digital natives who are quickly embracing mobile payments and other FinTech innovations” come onto the scene.