Why should your geographic location limit your ability to send and receive money? Why should it affect your ability to buy goods and services from around the globe? And why should someone from Lagos or Kampala not have the same kind of access to global markets as someone based in London? These are the kinds of questions that many organisations looking to embrace Africa’s young, digitally-savvy population and fast-growing economies are asking; and these are questions that regulators and governments on the continent should be asking themselves too.
As it turns out, one of the key factors helping create this kind of intracontinental and intercontinental economic freedom is interoperability. Simply put, interoperability is about ensuring that merchants are able to accept payments from any consumer, whether they’re using mobile money or a card and whether they’re online or offline. It also allows merchants to sell as easily to someone on the other side of the planet as they can to someone standing right in front of them.
Implemented properly, it’s something that can be wholly transformative for consumers and merchants alike. The former, frequently saddled with the inaccurate label of being “unbanked” can seamlessly access goods and services from around the world. The latter, meanwhile, can access new markets and previously unavailable opportunities. But in order for interoperability’s potential to be realised, regulatory frameworks that facilitate this seamless access are crucial.
Understanding Africa’s monetary shifts
In order to understand why this is so critical, it’s worth taking a look at some of the ways that the movement of money in Africa has changed over the years. Not too long ago, the picture that most people had in their minds was of small businesses using cash, and more recently, a domestic mobile money option like M-PESA or MTN MoMo to accept money.
But things have changed dramatically. Today’s African consumer is savvy, globally connected, and a digital native. They care about access more than the platform, meaning that the various available platforms being complementary is more important than any other sense of adversarial competition.
Let’s take a small trader in Lagos as an example. Although she can send money via bank transfer to a family member in Port Harcourt, her options are limited. Transferring money to someone outside Nigeria through the same channel becomes tedious. If that businessman travels to Nairobi, he should be able to withdraw cash from his own account from a local M-PESA agent. It should be similarly easy for him to make a mobile payment to a driver in Cape Town if he takes a holiday there.
Her reality is something that we’ve worked hard to bring to people across Africa for the past decade because we know how big of an opportunity it presents. Right now, for example, just 15% of African trade is intra-continental. And even so, that number is distorted by countries like Nigeria, Egypt, and South Africa which have long established global trade relations. The African Continental Free Trade Area (ACFTA) should help bring that number up, but it can’t achieve its full aims unless consumers and merchants across the continent are given the freedom that true interoperability presents.
Facilitating and embracing regulatory compliance
As an organisation that specialises in interoperability, we know first-hand how important regulations and regulatory compliance are to achieving that vision. Among other things, regulations enable the efficiency and integrity of financial markets, promote the fair treatment of customers by financial institutions, provide financial education and promote financial literacy, and aid in maintaining financial stability.
Those are all things that make life easier for those playing in the interoperability space. Stable and sensible regulations make it much easier for them to draw up lasting agreements with payment partners and other financial institutions, allowing for the legitimate free flow of money. It’s also important to remember that regulations are there to protect all players in the payments chain, including the end consumer. And when people feel that they and their money are safe, they’re much more likely to feel comfortable using new products and services.
With interoperability being a significant contributor to financial inclusion and economic growth, Regulators can play an important role in providing a regulatory environment which fosters digital payments and interoperability within their domestic markets and across the continent.
As a business, we take a proactive approach to compliance by scanning the environment for emerging trends in the payment space and how this may affect our partners, and MFS Africa as an organisation. With this approach, we can effectively address any emerging risks within the confines of local and international law and best practice.
Patrick Gutmann is Managing Director, MFS Africa