Destination Digital: Spotlight On Sub-Saharan Africa’s Prospects 

Innovations in digital payments are driving the Sub-Saharan region’s prospects for economic growth. As seen around the world, investment into digital transformation is paving the way for growth across the Central Europe, Middle East, and Africa (CEMEA) region – a trend reflected in the increasing share of consumers and retail merchants making transactions online.

In tandem, prospects for new businesses are encouraging, especially in Sub-Saharan Africa (SSA): while start-ups across CEMEA are seeing triple-digit growth rates for investment, the figures for SSA are particularly strong, with investment up 285% to US$2,1 million and deals up 26% to 392 in number in the last year, according to Visa Business and Economic Insights and analysis of data from Apptopia, Magnitt State of Startup Funding – 2022 Emerging Venture Markets Report.

How has the digital transformation seen around the world supported current and future growth in SSA? Acceptance of new forms of digital payments is key, businesses say. In the 2021 Visa Back to Business Study, three quarters of small businesses indicated that accepting digital payments was essential to their growth, with 90% reporting that pivoting to ecommerce – which relies on digital acceptance – had helped them survive the pandemic.

If there’s going to be a digital payments revolution, it cannot be limited to large businesses. In solving for this segment, we need to address the complexity, drive lower costs and innovate to create more frictionless ways for SMEs to begin accepting payments.

Inside The Great E-commerce Pivot

In SSA, as seen around the world, reduced movement and an increased wariness of handling cash has encouraged a shift from in-person to digital transactions, which can present new risks to manage. Aida Diarra, Visa’s Senior Vice President and Group Country Manager for SSA, explains: “There has been an accelerated growth in e-commerce as more consumers have become comfortable with transacting online and that necessitates a need to secure those transactions.”

Indeed, the Global Cybersecurity Outlook for 2022 reports a 31% increase between 2020 and 2021 in terms of cybercrime accelerated by the pandemic.

In response, and pioneered by Visa, tokenization – where a customer’s card number is replaced with a 16-digit equivalent, or token – continues to be a simple but powerful concept to protect sensitive payment data, to secure digital payments and, thereby, accelerate e-commerce acceptance. Through the Visa Token Service (VTS), Visa has already issued more than four billion network tokens, surpassing the number of physical cards in circulation globally.

Some 8,600 issuers and 800,000 merchants now use the service worldwide, leading to a 28% reduction in fraud rates and a three-point increase in transaction approval rates, helping to boost sales for merchants, while also saving them money on fraud-related expenses.

In SSA specifically, Visa issued nearly 1.2 million tokens, across 17 countries, in the month of August this year alone. This clear appetite among issuers, acquirers, merchants, and consumers to use Visa tokens reinforces that the future of money is truly digital – and that digital money must, as with any form of currency, be built on trust. That is why Visa will continue to prioritize enabling tokenization in the region, working with local e-commerce partners (including on its Click to Pay service, which eliminates passwords and having to enter card details manually), with the goal of taking tokenization to 70-80% of local transactions.

Accelerating Contactless

If digital sales are developing, in-person transactions are also changing shape. Nearly half of all card-present transactions in SSA are now contactless, another shift accelerated by the pandemic. This growth is largely concentrated in South and East Africa, so the opportunity is to support contactless take-up in the rest of the region because a market with strong contactless adoption not only depends less on cash, with all the benefits that can bring, but its merchants also see a lift in transactions.

So how is this best achieved? Contactless only grows when the entire ecosystem engages to fully understand the landscape and its barriers. For example, engaging regulators and retailers to establish reasonable limits and a risk management approach that all stakeholders are comfortable with.”

To that end, Visa has upped its efforts with contactless in Botswana, South Africa, and Kenya, using what it has learned in those markets to launch contactless pilots in four more SSA countries, involving five urban transport operators.

Building Trust In BNPL

In SSA countries, consumers increasingly not only expect to pay how they want, but when it suits them too. The rise of buy- now-pay-later (BNPL) transactions can be attributed to several factors: the flexibility they offer the consumer; growing adoption by merchants; and their appeal for both online and physical purchases. As a result, younger consumers, in particular, have embraced BNPL as a payment option.

While spending by this method is still relatively low compared to that of cards, its growing popularity deserves focus: BNPL is expected to account for roughly 24% of all global ecommerce transactions by 2026, up from 9% in 2021. This is illustrated by merchants’ appetite for the solution, with 65% of merchants in the 2022 Commerce and Payment Trends Report by Global Payments planning to add BNPL as a payment method.

The benefits are clear, globally, Visa has seen BNPL drive a bigger basket and the purchase of higher ticket items. We’re also seeing merchants embed BNPL in consumer shopping journeys and how consumers are using BNPL for everyday purchases as well.

As with any new payment method, practical realities are still catching up. In SSA, Visa is working to enable the BNPL ecosystem in key markets by incentivizing development for processors and gateways. Specifically, Visa is supporting the ecosystem for installment payment services (that let consumers use their existing Visa cards to enter into BNPL plans) in several SSA countries by launching installment payments with key card issuers.

BNPL is not the only new way to pay that is growing in popularity in SSA. Africa is the fastest growing cryptocurrency market among developing economies, as well as the third-fastest growing market in the world.

Our view is that interest in crypto will continue. Our research shows that consumers are intrigued by crypto – 85% of South African consumers surveyed are interested in their bank offering a crypto card, with 93% reporting they’d be interested in crypto rewards as a “risk- free” way to get into crypto. Consumers would also be more willing to acquire crypto from their primary bank.