Improving interoperability for increased transaction flows in Africa

The payments industry in Africa is rapidly evolving, driven by the rise of mobile and digital technologies, changing customer behaviours, and regulatory developments. In this article, we will explore the key trends and challenges facing the payments industry in Africa, with special attention to South Africa, Nigeria and Kenya, and identify the levers for change that can drive payments innovation and economic growth. We will also discuss how cloud infrastructure, such as AWS, can play a critical role in enabling compliant, secure, scalable, and cost-effective payments solutions for customers in Africa. (This article does not intend to be research to either support adoption or rejection of payments market infrastructure interoperability across the 54 sovereign countries recognised by the United Nations. Nor does it focus on existing interbank schemes, such as SADC-RGTS.)


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In recent years, there has been a significant push towards improving payments interoperability in Africa. The hypothesis is that this will lead to increased transaction flows, benefitting both people and businesses. In this article, we will explore the importance of interoperability, the key challenges and imperatives, and the levers for change.

Within EMEA we believe there are six imperatives the payments industry must address to capitalise on an evolving market where Cloud and Payments are converging. These six themes are:

  • Digitalisation: Increased digitalisation and cloud adoption is unlocking operational efficiencies, yielding insights into customer preferences and facilitating the delivery of value added services (e.g., embedded payments)
  • Industry consolidation comes with the pressure to drive cheaper payments methods and the identification of new revenue streams
  • Business innovation: accelerate through access to technology that enables delivering innovative solutions
  • Payments-as-a-service integration: commoditisation of payments transactions across our day-to-day activity
  • Regulation: constant enhancements and updates are placing pressure on payments systems 
  • ESG and its impact on the payments industry (e.g., how does a carbon footprint associated with a card payment compare to an electronic payment?)

Hence, the hypothesis to be proven is whether Africa is ripe for leading the payments interoperability among payments networks across the continent to support both businesses and individuals, driven by: (1) A young population leveraging new technologies and services (e.g. crypto); (2) Mobile phone penetration, in particular smartphones in large cities, supporting mobile wallets; (3) Cash-dominated societies looking to reduce operational cost and fraud.

Who is the customer?

Trends in payments volumes across South Africa, Nigeria, and Kenya have shown a significant growth from real-time payments, crypto and blockchain use, cross-border flows, and remittances. This is despite, according to McKinsey, only 5 to 7% of all payment transactions in Africa being made via electronic or digital channels. Sub-Saharan Africa recorded $48bn in personal remittances in 2021, up from $37bn a decade earlier (and $4.8bn in 2000).   

A lack of interoperability can hinder the growth of electronic payments and overall volume growth, and ultimately limit the potential benefits of financial innovation and inclusion.

Interoperability among payment market infrastructures might be the foundation for enhancing cross-border payments on the continent. It might also be the catalysing ingredient enabling Faster Payments (FPS) networks to proliferate in societies that have the luxury of multiple payment ecosystems to choose from. 

Choice brings with it challenges, as diverse payment ecosystems cater to a particular payment instrument operating on different payment infrastructures that are not always interoperable. 

To understand the importance of interoperability, it is crucial to understand who is most impacted. Governments, trade and finance institutions, individuals, and businesses all have a stake in the success of interoperability of payments. 

Adverse impacts of a lack of interoperability in payments include, increased risk of fraud, reduced resilience of the payments system, inconsistent service levels for end users, and most critically, a reduced reach of electronic payments.

The challenges

The African continent has about 42 different currencies, with high fluctuations, which presents some key challenges that include:

  • Counterparty risk, impacting settlement and liquidity exposure for clients
  • Operating times, for the support of multiple countries in six time zones across Africa
  • Currency volatility risk – African currencies are subject to extremely volatility, currently hedged against the reserved currencies when cross-border payments take place
  • The availability of core software providers, e.g. Mojaloop
  • Innovation: fintech investments continue to grow – according to McKinsey, between 2020 and 2021 tech start-ups tripled to around 5200 companies
  • Infrastructure costs: the adoption of cloud technology is expected to become a key enabler for the continent, providing the agility and price point required to foster innovation
  • Financial crime: as real-time payments expand in other geographies, allowing customers and businesses to enjoy immediacy, financial crime emerges as a far more challenging topic to resolve across multiple countries

The Pan-African Payment and Settlement System (PAPSS), led by Afreximbank, seeks to drive trade settlement in local currencies as opposed to reserve currencies (e.g., US dollar, British pound, the Euro) to reduce forex costs. However, this cost is precisely what caters for volatility and counterparty risk by leveraging reserve currencies not subject to large-value fluctuations.

A recent payments interoperability scheme is the Indonesia, Malaysia, Philippines and Thailand Memorandum of Understanding (MOU) launched in November ’22, however, the outcome is yet to be validated.

The levers for change

Payment ecosystems rely not only on the technology, but also on scheme rules, legal frameworks and regulatory oversight bodies that manage the risks associated with the operation of a payments system. Each of these layers has its own challenges and levers for driving increased interoperability. 

Technology: the technology used to enable interoperable payments is found at the infrastructure layer as well as the application layer. 

Cloud infrastructure, particularly AWS, can play a significant role in addressing the challenges and imperatives of the payments industry. Cloud infrastructure provides the capacity to match payment volume growth, ensuring that the industry can keep up with the increasing demand. 

It also provides higher security and lowers the costs of establishing payments market infrastructures, making it more viable to financial institutions to provide competitive offerings at the application layer.

Digital currencies are becoming increasingly important, especially for remittances. However, the lack of standardisation and
the volatility of currencies can hinder the adoption of digital currencies. Central banks can play a crucial role in developing regulations and standards to address these concerns.

Scheme rules: scheme rules define the operational guidelines, rules, responsibilities and service levels between payment service providers. Across Africa there are several schemes that cover card networks, wallets, clearing houses, buy-now-pay-later schemes, instant payments etc.

Real-time gross settlement: moving money across the various payments market infrastructures can be slow (introducing counterparty risk and fraud) as well as costly (due to ‘interchange’ fees).  The cost to transact is a significant barrier for many individuals, especially those in underserved and remote areas, which ultimately hinders financial inclusion goals. 

To illustrate this, consider a worker based in South Africa who sends money home to Nigeria for a family member who wishes to buy a Kenyan good. 

This very typical transaction journey will not be able to leverage any of the existing instant payment schemes from Payshap (South Africa), NIBSS (Nigeria) and IPSL (Kenya). Instead this transaction will take more than five days and incur in excess of 5% of the transaction value. 

Legal and regulatory frameworks

Interestingly, despite the proliferation of payment methods in Africa, cash remains the most popular method of payment. This phenomena is most pronounced in the three major economies of Egypt (67% cash), Nigeria (66%) and South Africa (40%). 

Paradoxically, Africa leads the world as the region with the most mobile money accounts and unfortunately a lack of interoperability means many wallet users will cash in and out of these wallets in order to complete transactions and move money where it is most needed. 

Legal and regulatory frameworks
that support inter- and intra-country transactions, whilst protecting end users from abuse, are critical in de-cashing societies. 

A more coordinated policy and regulatory approach to intentionally drive interoperability will provide end users with options that allow for using the payment method of choice – without necessarily relying on cash. Trust, counterparty risk, and payment fraud are concerns that need to be addressed to ensure the success of digital and instant payments.

Public policy must develop specific regulations that spread payments across Africa while ensuring that the regulations are tailored to local needs. This is easier said than done as there are 41 central banks on the continent, which adds complexity to standardisation. 

The onus is not only on governments and regulators. Standards, partnerships, and initiatives, such as Visa’s $1bn Africa Pledge and Mastercard’s Community Pass, can also help to achieve this goal. By working together, the industry can develop common standards and promote interoperability, leading to more significant transaction flows and ultimately driving economic growth (e.g. cross-border trade, remittances).


Improving payments market infrastructure interoperability in Africa is likely to drive financial inclusion and promote economic growth. The key challenges and imperatives, such as financial inclusion, instant payments, and digital currencies, need to be addressed to achieve this goal. 

Cloud adoption, payments regulation, and payments market infrastructure
interoperability are the levers for change that can help to achieve the desired outcome.

Amazon Web Services (AWS) is the world’s most comprehensive and broadly adopted cloud, offering over 200 fully featured services from data centers globally.

For further details please contact:

– Alfred Mukudu, Head, FS GTM sub-Saharan Africa,  Amazon: [email protected] 

– Pablo Villegas, Head, GTM Payments EMEA, Amazon: [email protected]  

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