The African Enginnering Pay Landscape
The African Enginnering Pay Landscape
The African Enginnering Pay Landscape
Africa’s payment system continues to rapidly evolve . Africa is still home to a large
unbanked population. Eighty percent of adults in sub-Saharan Africa don't use any
formal or informal banking facilities, and only 5% of adults have a credit card. It's
not just customers who are excluded: even in the relatively advanced South
African market where 75% of adults have a bank card, only 6% of sellers or
merchants accept card payments.
There is a fundamental shift taking place in the African payments sector, driven
partly by public and private sector efforts to bring more people into the formal
economic fold, and partly by a proliferation of mobile phones that is connecting
more of Africa’s citizens to vital information and app-based services.
The World Economic Forum estimates that 93% of African have access to a mobile
phone. In contrast, only 65% have access to electricity at their homes, and only
30% live in areas with functioning sewerage systems.
The South African Reserve Bank has written financial inclusion into its strategic
objectives, commenting that “cooperation and collaboration among industry
stakeholders should ensure that the national payments system contributes to
deepening financial inclusion by providing access to the effective use of formal
financial products for all South Africans.”
Ghana.
Payment systems and services bill draft released. The Bank of Ghana (BoG)
recently released a draft bill aimed at consolidating existing mobile money and
payment system regulations. In particular, the new bill – the Payment Systems
and Services Bill 2017 – will consolidate the Electronic Money Issuers and Agents’
Guidelines and the Payments Systems Act 2003 into one piece of legislation. The
bill places a wide range of payment providers – including specialised deposit
taking institutions, dedicated electronic money issuers, payment service
providers, banks and their affiliates and agents – under more direct supervision of
the BoG and includes articles aimed at protecting consumers and customer
information. The bill is currently before the Ministry of Finance (MoF) and will
soon be sent to Cabinet for consideration.
Guidelines issued for interest payments on e-value. The BoG issued a directive
requiring Mobile Money Operators in Ghana to pay interest on their customers’ e-
value. Under this arrangement, the banks would continue to benefit from a
relatively stable, large and growing deposit balance (even though they now have
to pay interest on it). Mobile Money Operators would retain up to 20 percent of
the interest earned (which the BoG suggests should be used to drive customer
acquisition). And the remaining 80 percent of the interest would go to customers.
The BoG hopes this will help enhance customer benefits while providing all
players an incentive to support the growth of mobile money in Ghana.
New Information Security Framework on the drafting table. The BoG is currently
drafting a Cyber and Information Security Framework that aims to establish
security protocols and procedures to cover a wider range of different routine and
emergency scenarios, inter and intra-company communication and cooperation
as well as network security. The framework is expected to require all institutions
that handle, process, store or transmit credit or debit card information to become
Payment Card Industry and Data Security Standard (PCIDSS) certified.
South Africa.
New Financial Sector Regulation Act passed. The culmination of more than a
decade of collaboration between the South African Reserve Bank (SARB), the
National Treasury and the Financial Services Board, the new Financial Sector
Regulation Act represents the most fundamental reform of the sector in more
than 30 years. The new legislation, signed into law in 2017, establishes the
Prudential Authority (tasked with ensuring the safety and soundness of financial
institutions) and the Financial Sector Conduct Authority (FSCA), tasked with
consumer protection and market conduct. The reform heralds in a new era of
regulation by objective where two entities focus on different but complimentary
regulatory objectives.28
Minister reconfirmed that “work will continue on reforming the legislation for
financial markets and the payment system to ensure that our infrastructure
remains globally competitive.
SARS to provide clarity on tax implications of crypto currencies. In his 2018 budget
speech, the Finance Minister also noted that “the emergence of crypto currencies
is a major development to which our regulatory regime must respond.
The South African Revenue Service (SARS) had planned to provide clarity on the
tax implications of transacting in crypto currencies in early 2018. SARS, like most
other revenue authorities around the world, is trying to assess the implications of
virtual currency on its tax base. Currently, crypto currencies are treated under
Capital Gains Tax. SARS is now in discussions with a number of technology
companies to improve the way it tracks crypto currencies.
Nigeria
Central Bank retains existing rates for cash. Having extended the government’s
‘cashless’ policy to all 36 States and the FCT in 2014, the Central Bank of Nigeria
(CBN) released a new circular in February 2017 that suggested that rates would
change. The circular set limits and defined charges for cash withdrawals and
deposits in bank branches as a way to further promote the adoption of electronic
payment channels within the system. The circular set charges of 1.5 percent for
cash deposits and 2.0 percent for cash withdrawals on amounts of between
NGN500,000 and NGN1 million (US$1,400 and US$2,800) starting in April 2017.
However, in another circular issued in April 2017, the CBN reverted to the old
charge structure.
Final and irrevocable’ defined. In July 2017, the CBN issued a circular that clearly
defines the specific point at which payments are deemed to be final and
irrevocable. It includes the four payment schemes in Nigeria (the Real-Time Gross
Settlement system, Cards, Mobile and ACH/Cheque/Instant Payments) and
ensures that no payment system will invoke the principle of ‘unwind’. The
unwinding of payments by one participant could cause further banks to breach
their collateralised position which, in turn, could create more systemic risk in the
payment system. An overview of the specific ‘point of payment finality’ across the
various schemes can be found.
New interchange fee suspended. At the end of 2016, the CBN issued a directive
that introduced a new interchange fee as a replacement to the Merchant Service
Charge (MSC). In its place, the CBN announced they would be introducing a new
pricing scheme where merchants would control the MSC and the Central Bank
would control the interchange fees. The idea was to increase payment card
issuance and utilisation, and to drive greater investment into loyalty programmes
and the expansion of acquirer network infrastructure. However, in a circular
issued in April 2017, the CBN announced that it was suspending the
implementation of the new scheme. Industry stakeholders are currently awaiting
further instruction on the future of the implementation.
Kenya.
Single supervisory centre created for financial services. Kenya’s cabinet approved
a new Financial Services Authority Bill in early 2017. The bill consolidates the roles
previously served by the Capital Markets Authority (CMA), the Insurance
Regulatory Authority (IRA), the Retirement Benefits Authority (RBA) and the
Saccos Societies Regulatory Authority (SSRA) into one single supervisory centre.
The bill aims to eliminate any regulatory gaps in Kenya’s financial services industry
and to increase protection for financial services consumers in the country.
Competitive landscape shifts in the banking sector. Three new banks have
announced their intention to start operations in Kenya in the near future. Both
Mayfair Bank Limited and DIB Bank Kenya were granted licences to operate in
Kenya by the Central Bank bank in 2017.
Egypt.
Financial inclusion is one of the government’s top priorities, and it has taken steps
to bring the large unbanked population into the formal banking system. As part of
Arab Financial Inclusion Day (which was held between April 27, 2017 and May 4,
2017) the CBE directed Egyptian banks to make efforts to attract unbanked
consumers. Activities included the presentation of banking products in remote
areas and offering bank accounts for free or for a minimal fee. Banks such as Abu
Dhabi Islamic Bank (ADIB) allowed individuals to open bank accounts without
requiring a minimum balance or administrative fee at its branches and
microfinance units across the country. Overall, 80,000 new bank accounts were
opened during the program.