Digitizing African Informal Trade Sectors

Governments in emerging markets, such as India, have played a crucial role in promoting the adoption of contactless payments through policy and infrastructure investments and developments, that have supported the rapid development of payment systems outside of traditional banking products. These have seen digital transactions grow from 2.5% in December 2018 to 16% in December 2021.

In Africa, similar initiatives have shown that they can stimulate adoption of cashless transactions with a higher level of security and ease of payment for consumers the result.

Contactless payments have become the norm in developed markets, but in Africa, even in developed cities like Lagos, Johannesburg or Kingshasa, if you use public transport, cash is normally the only option. That is where examples that have shown the enormous potential of contactless payments in specific usage environments can be found. The success of initiatives such as Nigerian based TAP and Cowry Cards have highlighted the benefits of these cashless technologies in the transportation and retail sectors.

The start-up developed a contactless payment option (tap-to-pay) via a physical transport card – called the Cowry card – that is also available on a mobile app. The system functions by users loading money onto the card at local retailers or use a bank card to load money onto its smartphone app to then are able to pay cashless for public transport. The system has grown after launching in 2019 to around 4 million users in total and 500 000 active users on average daily

The potential market for contactless payments in Africa is significant. Africa’s informal retail trade accounts for up to 80% of total retail sales in some countries and drives $1 trillion in annual sales. This presents a vast opportunity for growth. By enabling these business sectors to accept contactless payments, this has the potential to stimulate further economic development.

Contactless payments offer a promising solution to the challenges posed by cash-based micro-transactions in Africa, such as the hiding of revenues from taxable income that in turn reduces money available for infrastructure development and social support.

By addressing the underlying obstacles and leveraging the potential of this technology, new cashless payment systems can create a more efficient, and secure payments ecosystem. As Africa continues its journey towards digital inclusion, contactless payments are poised to play a pivotal role in shaping the future of commerce.