Africa: hotbed for cash and payments innovation

With its population of 1.5 billion (twice that of Europe)¹ and a fast-growing continent-wide GDP of $3.4 trillion², Africa has become a magnet for new approaches to payments – cash and digital, and a hybrid of the two.

That is seen in the highly effective mobile money (MoMo) services and agent-based banking networks in countries such as of Kenya, Nigeria, and Tanzania. It is there in the state-of-the-art cash management infrastructures of Egypt and Rwanda. And it is also evident in the exploration of central bank digital currency (CBDC) in countries like Ghana, South Africa, Nigeria, and Eswatini.

Interplaying forces

A host of inter-related factors are fueling that fast-moving environment and reshaping the money landscape across that the vast region of 54 countries:

• Large unbanked population
  A significant proportion of citizens in Africa lack access to financial services, driving the need for alternative solutions – many of which integrate digital mechanisms and cash.
• Financial inclusion agenda
  Governments and financial institutions across Africa have a common goal: they are actively seeking ways to bring more people into the formal financial system. That is being encouraged through enhanced regulatory environments, investment, and support for both state-initiated and commercial services.
• Cross-border payments
  The need for more cost-efficient cross-border payments is leading to innovation in remittance services and regional payment systems, helping individuals repatriate funds when working abroad and facilitating trade and economic integration across the continent.
• Infrastructure challenges
  The continent’s infrastructure challenges have spurred the development of unique solutions tailored to local conditions. For example, financial technology companies are developing digital payment approaches that work even when devices are offline, a vital capability for people in rural locations where there might be limited internet connectivity and intermittent access to electricity.
• ‘Leapfrog’ economics
  Many African countries haven’t built up the kind of legacy infrastructure that can impede the structural renewal seen in many developed economies. This is allowing Africa to embrace new waves of technology more readily in areas such as mobile payments, digital currency, and blockchain without having to evolve from existing solutions.
• High mobile phone penetration
  Symbolic of Africa’s capability to embrace fresh generations of technology, mobile phone penetration in Africa is higher than might be expected given relatively low per capita income. The GSMA’s Mobile Economy report series for 2024 shows North Africa with a mobile market penetration rate for unique mobile subscribers of 71 %,³ and Sub-Saharan Africa with 44 % – though the vast majority of those devices are basic/feature phones connected to 3G networks rather than smartphones on 4G or 5G.⁴ This widespread use of mobile devices has created a robust environment for related services, allowing for innovative financial solutions that, in many cases, bypass the traditional banking infrastructure.
• Young population
  According to the United Nations, Africa has the youngest population of any continent, with 70 % of Sub-Saharan Africa under the age of 30.⁵ That points to an audience that is receptive to new tech-driven financial service models.

• Entrepreneurial ecosystem
  The appetite for new solutions has spurred a buoyant entrepreneurial environment, with countries such as Nigeria, Kenya, and South Africa now well-established as hubs for fintech startups and magnets for young tech talent. More than 530 venture capital deals were struck with African startups in 2023, worth a total of $3.2 billion, with almost half of that invested in the financial services players.⁶ Notable success stories include Flutterwave and Interswitch in Nigeria; MNT Halan and Fawry in Egypt; Sendwave, M-PESA, and M-Kopa in Kenya; Chipper Cash in Ghana and Uganda; and Wave Mobile in Senegal.

  Alongside these multiple drivers, there are a whole set of macroeconomic, political, and environmental factors that are stimulating innovation and accelerating take-up of new financial services options. In turn, that increases the need for resilient, flexible systems, and robust supporting infrastructure.
   

With cash still in high demand, these new channels have quickly become key parts of African payments landscape. The model also works well for banks, observes management consultancy McKinsey: “For banks, these networks with their lower operating costs have become a critical channel for customer acquisition and servicing, enabling access to a new segment of customers.”¹⁰

The evolving role of cash

As that signals, while cash is still widely used in Africa (in 90 %+ of transactions, by some estimates), its role is undergoing a complex transformation as e-payments, mobile money, peer-to-peer (P2P) transfers, and other mechanisms gain traction. What is abundantly clear is that it will continue to co-exist alongside diverse payment options for the foreseeable future, especially in light of the major role of the informal economy and the unbanked/underbanked segments of the population. 

“There will continue to be a strong preference for cash – but now it is in combination with digital alternatives. As a result, you can expect the volume of cash to grow in step with digital,” says Mohamad Farhat, Managing Director for Nigeria and Vice President International Operations at G+D Currency Technology in Africa. “That puts pressure on the cash cycle to be increasingly more efficient – in terms of the automation of cash management, analytics, storage, and logistics.”

Naturally, the blend of cash and digital will depend on the transaction type, the location, and on personal preferences. “Perhaps most fundamentally in areas such as MoMo, cash now actually acts as a gateway to digital finance,” says Farhat.
 

South Africa’s blend of cash and digital

South Africa, with its developed financial system, has a high rate of card and digital payment usage, supported by a widespread adoption of both feature phones and smartphones. “Such advanced infrastructure has helped to drive a much wider and faster adoption of e-payments,” says Sannasy. But that still sits alongside an unwavering attraction for cash.

Reflecting the trust in cash, the country’s introduction of a new banknote series in May 2023, complete with state-of-the-art security features, highlighted a commitment by the South African Reserve Bank to maintaining a secure and reliable cash system.
 

While formal access to the banking system is widespread in South Africa, there are some behaviors that point to a deeper trust in cash, says Sannasy. That is especially evident with social welfare payments – with most payees withdrawing the funds immediately on receipt.¹³

“What is clear is that there is a definite mandate within the country to keep the features of cash both relevant and in line with the latest design standards for the highest security of banknotes. That drives trust and stability into the entire market,” he adds.

Evolving enthusiasm for CBDCs

With the prospect of a marriage of digital and cash, African central banks have also been frontrunners in the exploration of central bank digital currency. This digital equivalent of cash promises to address some of the big challenges that central banks face regarding payments and transfers. These include the costs associated with commercial transactions, the need for an offline payment capability, the pressure to manage the economic risks associated with unregulated assets such as crypto, and a desire to direct digital cash to specific target populations.

As more and more African countries take steps towards the possible introduction of CBDC, their exploration and experiments are highlighting some clear advantages:

• Enhanced access and convenience
  CBDCs can offer a convenient, secure and low-cost way to make digital payments, improving access to financial services (especially in remote areas). And when they support an offline capability, CBDC devices can secure access to payments in any place and situation, even when no internet service is available.
• Potential cost savings
  CBDCs could lead to reduced fees compared to traditional money transfer services, especially for cross-border payments.
• Increased financial efficiency
  CBDCs can streamline transactions and potentially make them faster and cheaper.
• Programmable features
  CBDCs can support additional features that allow for a programmable distribution of funds to digital wallets. That would allow governments, for instance, to distribute urgent social welfare payments. 

Many of these strategic goals feature in the CBDC Design Papers of African countries such as Ghana¹⁴ and Eswatini¹⁵. But both are also considering the potential of access to central bank-issued digital money to foster broader financial inclusion, drive innovation and new business opportunities, and increase the digitalization of their domestic economies.

Of course, CBDCs are just part of a much wider, fast-evolving picture of payments in Africa. No one doubts that the dynamic characteristics of the continent will drive further waves of innovation and opportunity. Most African countries are likely to enjoy a broad mix of digital payment options – but with cash as the economic and societal bedrock. 

Published: 24/04/2025