Contactless Payments Post COVID-19: Is Africa Ready?

I am very passionate about upgrading the African payment ecosystem. You may even accuse me of being a whiner, but I know that all countries across the globe are adopting wide-ranging measures to reduce mortality and morbidity associated with the evolving COVID-19 pandemic, and mitigate the short-to- medium and likely long-term economic fallout of this crisis.

Going forward, there are important lessons that African countries should learn from these containment measures. Top on the list is that it is becoming increasingly clear that African countries need to implement measures to promote economic diversification as part of efforts to build economic resilience, but also critical is the need to change some traditional habits like the use and storage of cash. In the past, central banks have deployed a lot of resources towards changing the long established methods of payments which is cash to cash less/ cash lite i.e. improving the handling of cash and reducing the use of cash to settle transactions.  

While there exists weak evidence on the spread of the COVID-19 virus through banknotes, the World Health Organization (WHO) has flagged that banknotes are a likely conduct of coronavirus infections and advised governments to consider alternative contactless payments to curb the disease. In the near future, it is likely that the stigma attached to the use of banknotes to finance transactions would increase, and given the trajectory of infections in Africa, countries whose transactions are predominantly cash-based could find it challenging to tackle the problem. This in turn would impose severe economic burden on vulnerable populations that rely extensively on cash-based transactions for their livelihoods.

Given the low level of financial inclusion rates in most countries in Africa, widespread stigmatization would create additional barriers to trade, especially informal trading across borders and reduce access of vulnerable people to basic goods and services. Again, adopting contactless payments system infrastructure, as recommended by WHO, certainly requires a centralized payment and settlement infrastructure to promote intra-African trade and financial integration in the region. African governments need to take a coordinated approach to expedite actions to adopt a reliable, efficient, and interoperable payment system infrastructure that will support real-time transactions and provide the platform to anchor digital and mobile retail networks across Africa.

I think that it is the right time for the African Development Bank (AfDB) to invest massively on Unique Bank Identity systems, while the adoption of the Pan African Payment and Settlement Platform (PAPSP) proposed by Afrieximbank cannot be timelier to promote trade and financial integration in Africa, especially post this pandemic.