By Annalisa Plachesi
Digital payments have fundamentally transformed lives across Africa by providing access to financial infrastructure and enabling innovation. More jobs have been created, leading to higher incomes that help sustain economies and millions of households.
For the most part, however, that innovation has resulted from private-sector initiatives. But it doesn’t have to be that way. Non-governmental organisations across the continent should also embrace the digitisation of payments. In doing so, they can deliver funds directly to a broader group of people, even in remote regions.
With a global recession increasingly likely, effective and quick digital payments will be important not only to ensure that NGOs can maintain their budgetary spending in the coming year but also that they can provide aid (typically in the form of a grant) and financial support (including small loans) to their beneficiaries.
The power of digital payments
To understand how big a difference NGOs and Global Development Organisations embracing digital payments can make, it’s worth reminding us just how impactful digital payments have been in the private sector.
Many people, especially outside the continent, still default to the example of mobile money if you mention digital payments. But while mobile money undoubtedly sets the tone for many African financial technology innovations, things have improved significantly.
According to McKinsey, Africa’s domestic e-payments market is expected to see revenues grow by approximately 20% per year, reaching around $40 billion by 2025. Comparatively, global payments revenue is projected to grow at seven per cent annually over the same period. And in 2020, McKinsey adds, domestic electronic payments revenue of $15 billion was generated from 47 billion individual transactions totalling just over $800 billion of transaction values.
With the benefits of digital payments growth – including instant payments across borders, cost savings (often increased by legacy systems), and time savings (by having to go into a bank) – that level of growth shouldn’t be surprising.
Factor in the ability for consumers to have access to international products and services they otherwise wouldn’t have had access to (including music streaming and e-commerce services), and it’s easy to see why it makes little sense to talk about African people as unbanked.
The benefits of digital payments to aid disbursement
By digitising aid disbursement, one quick and noticeable improvement is in the reduced cost of transactions. Efficient real-time bulk payment services mean you can eliminate all other costs associated with manual disbursement.
You can directly influence the safety of your aid workers, who often must distribute cash in hard-to-reach areas. People are safer as they don’t have to walk around with large amounts of cash. Receiving payments in real-time could also make all the difference to beneficiaries who need them for survival.
Digitising payments can also improve financial management. That’s because digital payments leave more comprehensive, complete, traceable, and timely records. That makes it more challenging to hide ghost beneficiaries in payroll systems. In Ghana, for example, the introduction of a digital payroll has helped remove thousands of ghost workers, saving the government millions of dollars every year.
Non-governmental organisations also have donors who require accountability. Digital payments provide efficient financial management tools and a much-needed database. Payment processes are simplified, and there’s transparency over finances and disbursements.
Beware of exclusionary tech
For digitisation to have those positive effects, however, it cannot be exclusionary. It’s pointless, for instance, to roll out an app that allows people to receive grants if most of the people it targets don’t have regular connectivity or internet access.
By deploying inaccessible technology, we can shut out the people whose lives that technology is supposed to improve. It’s, therefore, critical that digitisation schemes are designed to make sense for the majority while still catering to those unwilling or unable to embrace it.
The digital payments opportunities seized by the private and some public sector players show that this is the future of financial inclusion and access on the continent. Switching to digital payments means removing restrictions that stifle aid disbursements. NGOs, particularly those who must disburse across multiple countries and currencies, do not have to deal with complex processes from multiple providers in the process.
They can also eliminate errors such as making payments to the wrong recipients and fraud. At MFS Africa, we are very aware of how financial inclusion positively transforms lives on the continent, and our solutions are consciously shaped to provide access to convenient, secure, affordable, and regulatory-compliant solutions to help NGOs and GDOs navigate multiple currencies, domestic and cross-border payments and fast settlements across the continent.
(Annalisa Plachesi is the UK and EU GDO Relationship Manager, MFS Africa).