In the vibrant markets of Lagos, the winding alleys of Nairobi, and the digital kiosks of Casablanca, a quiet revolution is underway—one that is redefining how money moves across the African continent. While digital payment infrastructure has expanded steadily over the past decade, recent data suggests Africa remains a continent caught between two economic paradigms: the persistence of cash and the promise of contactless technology.
According to the WorldPay Global Payments Report 2024, mobile money accounts have reached an impressive 2.1 billion globally, a considerable share of which is concentrated in sub-Saharan Africa, home to the mobile money revolution. Yet despite this growth, over 43 percent of all transactions in Africa in 2022 were still settled in cash, and in Nigeria—the continent’s largest economy—cash still accounted for 55 percent of purchases in 2023. This is more than triple the global average of 16 percent, highlighting a clear lag in the continent’s journey toward digital transformation.
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The economic implications are not trivial. Cash-based economies tend to be opaque, inefficient, and expensive. Informality limits tax revenue, constraints financial inclusion, and blunts the impact of monetary policy. Nigeria’s informal economy, for instance, contributes nearly 56 percent of GDP, with a staggering ₦35 trillion ($25 billion) in currency reportedly circulating outside the banking system in 2019. These conditions foster vulnerability—not only to inefficiencies but also to illicit activity and volatility.
At the same time, there is reason for optimism. As the presentation by Redtech, during the recent Businessday Future of Payment Conference, a Nigerian fintech powerhouse, reveals, POS transaction values in Nigeria surged to $191 billion in 2023, with projections of $215 billion by 2027. Yet only 7 percent of those transactions were cashless—suggesting that the infrastructure is present, but adoption remains a bottleneck.
“For development finance institutions and donors, catalytic capital is essential to bridge infrastructure gaps and de-risk innovation.”
The rise of contactless payments—particularly through NFC (Near Field Communication) technology—offers a timely solution. In Morocco, for example, over 55 percent of card transactions are now contactless, a dramatic uptick aided by partnerships with local banks and the rollout of Apple Pay in 2023. The North African nation’s experience presents a roadmap for others: investment in interoperable infrastructure, strong public-private partnerships, and user education can yield rapid digitisation.
The digital dilemma: Barriers to adoption
So why has Africa’s contactless revolution stalled in much of the continent? The answer lies in a matrix of economic and infrastructural challenges:
· Device and connectivity constraints: Low smartphone penetration and unstable internet access limit both consumer and merchant participation.
· Sparse merchant infrastructure: Especially in rural areas, few merchants accept digital payments, leading to continued reliance on cash.
· High costs: POS terminals, software upgrades, and maintenance present unaffordable capital costs for small businesses.
· Fragmented payment ecosystem: A proliferation of QR codes, wallets, and card schemes has created confusion rather than convenience.
· Energy and internet reliability: Power outages and poor broadband access continue to hinder consistent transaction processing.
In economic terms, these obstacles translate into higher transaction costs, lower velocity of money, and restricted access to credit markets—all of which weigh on productivity and formalisation.
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Stakeholder imperatives: Building a digital economy
To transition from potential to prosperity, Africa’s public and private sector actors must recalibrate their strategies. For central banks and monetary authorities, the priority is clear: strengthen digital payment infrastructure while promoting financial inclusion. This includes:
· Expanding mobile network coverage and investing in digital IDs to make onboarding easier for the unbanked.
· Incentivising digital payments through tax credits or transaction subsidies for merchants who accept contactless payments.
· Modernising regulatory frameworks to promote interoperability among payment platforms and reduce fragmentation.
For commercial banks and fintechs, the race is to scale affordable, reliable, and intuitive solutions for both consumers and micro-merchants. Redtech’s suite of offerings—including POS terminals, mobile apps, and e-commerce gateways—serves as a promising model. Fintech players must:
· Build trust through transparency, low failure rates, and user education—particularly among informal sector traders.
· Localise solutions, including language interfaces and USSD options that work in low-data environments.
· Forge partnerships with telcos, cooperatives, and governments to create robust ecosystems rather than isolated products.
For development finance institutions and donors, catalytic capital is essential to bridge infrastructure gaps and de-risk innovation. Support from the African Development Bank (AfDB) and GSMA has helped expand coverage, but more targeted investment is needed to scale success stories continent-wide.
From fragmentation to flow
Perhaps the greatest economic reward of Africa’s contactless future lies in the potential to integrate its fragmented markets. With tools like Payment-as-a-Service (PaaS) and blockchain-enabled cross-border payments, countries can streamline regional trade, formalise labour markets, and reduce transaction friction. This vision aligns with the African Continental Free Trade Area (AfCFTA), which hinges on efficient, secure, and accessible payment systems to flourish.
Read also: Nigeria presents initial findings from Digital Trade Survey at inaugural AfCFTA forum in Lusaka
Yet, realising this vision will require not just technology but trust. Africa’s payment revolution will succeed not merely by replacing banknotes with tap cards but by reengineering the financial experience—making it inclusive, affordable, and dignified.
Final word
In the shifting terrain of African economics, the future of payment is not only digital—it is contactless, interoperable, and people-centred. But to harness its full promise, stakeholders must act decisively. As Redtech’s case suggests, the tools are ready. What remains is the political will, cross-sector coordination, and cultural change to deliver a truly cashless continent—one transaction at a time.
Dr Oluyemi Adeosun is BusinessDay’s Chief Economist.
