Eromosele Abiodun
Analysts at McKinsey research have projected 152 per cent growth in Africa’s electronic payments market by 2025.
The firm in a report estimated that while cash is still king in Africa, the e-payments market is likely to grow by more than $40 billion in revenues from domestic payments alone between 2020 and 2025, with about 188 billion in transaction volumes.
The report also highlighted the challenges and possibilities for traditional and non-traditional players looking to find their niche, “in this rapidly evolving and increasingly competitive landscape.
“In 2020, e-payments generated approximately $24 billion in revenues, of which about $15 billion was domestic electronic payments from 47 billion individual transactions totaling just over $800 billion of transaction values. However, on average, only five to seven per cent of all payment transactions in Africa were made via electronic or digital channels.”
An Associate Partner in McKinsey’s Lagos office, Edem Seshie, said e-payments constitute a significant growth opportunity on the continent, especially as the convenience and scalability of payment methods improve and support infrastructure develops.
He added that, “Enduring pain points coupled with shifts in consumer and business behavior, as well as supportive government and regulatory environments, are opening up unprecedented opportunities for the acceleration of e-payments in Africa.
It added, “Local, global, traditional, and new players are all innovating to capture the $40 billion of revenue potentially at stake by 2025. This is an exciting, complex, and evolving market with tremendous growth prospects, and we can expect to continue seeing a new generation of winners emerge and scale.”
Key highlights of the research include: the compound annual growth rate (CAGR) of revenues for online payments which will likely exceed 30 per cent, possibly reaching about $13 billion in 2025, meaning revenues will more than quadruple between 2020 and 2025.
It added that cards and wallets could account for nearly 40 per cent of revenues, respectively, with account-based payments accounting for less than 25 per cent, “around half of future electronic-payments revenue will likely come from Egypt, Ghana, Kenya, Nigeria, and South Africa, with the fastest growth in Nigeria, at 35 percent per year.”
The report further added that, other countries that could see electronic-payments growth above 20 per cent per year include Ghana, Ivory Coast, Kenya, Senegal, and Uganda.
“South Africa is likely to represent a smaller share overall while remaining the biggest e-payments market in Africa in 2025, with $5 billion in annual revenues,” the reported highlighted.
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