African governments have been urged to get rid of unnecessary regulations and unfriendly tax regimes that curtail cross-border payments

A report by Africa Nenda, titled The State of Instant and Inclusive Payment Systems in Africa, released on the sidelines of the GSMA MWC event in Kigali this week.

The report found that digital payment regulatory frameworks in many African countries are set up to favour larger players, specifically banks, excluding the interests of the smaller players.

“This creates an unlevel playing field, this can be a result of a payment service provider licensing regime that curtails the access to payment infrastructure for new entrants.”

It also notes that a regulatory barriers exist as requirements for customer due diligence.

“If there is no oversight of financial institution recourse processes, individuals are less likely to use the instant payment systems (ISPs) in general,” reads the report, adding that “the result for end-users has been an unlevel playing field which fuels mistrust in digital payments, which stifles uptake and usage.”

Covid pandemic

Akinwale Goodluck, deputy chief executive of AfricaNenda, said the unfriendly regulation by governments came out clearly after the coronavirus pandemic subsided.

“Digital payments grew through the roof during the pandemic, governments took helpful actions in terms of building consensus with operators to lower the cost and eliminate barriers to entry, that was positive”

“But the flipside is, as things began to ease up and adoption shot up, governments started to see an opportunity for revenues,” noted the report.

Over taxation of the payments industry has led to growth in the cost of using digital payments, driving many back to transacting using cash.

“We are working around policy, engaging governments and other critical players in the ecosystem to see that these issues are addressed” said Akinwale.

According to Africa Nenda, the continent is witnessing a dramatic growth in IPSs, scaling from 2 systems in 2012 to 29 in 2022. with more than a third of these coming online in the past one year.