Are you a fintech? Things are changing very fast in Africa. From all the elements I have seen as the African Continental Free Trade Area (ACFTA) ramps up, the selling point of most fintechs will collapse on the day ACFTA begins operations. Simply, some ACFTA’s payment framework will disintermediate what most fintechs do, and eliminate the core necessity of their existence within the nexus of intra-African trade. If you check, most startups, at the continental level, are built on the premise that they can reduce frictions on cross-national transfer and payments, within Africa. Of course, I have maintained that none has done just that in this video.
What that video explains will be done but fintechs may not be the entities that will do it: ACFTA has some vehicles to do it, and one of those vehicles will be the Pan African Payment and Settlement Platform (PAPSP). Sure, any authorized entity can connect into a payment settlement system but if the settlement system is very efficient, the original friction will be significantly reduced. When you reduce the core friction, companies created to solve the friction will have lesser value to be created. Simply, your bank app can offer many great features that the idea of going to a fintech may not even be necessary.
In order to solve the paralysis in intra African trade, the African Export Import Bank (AFREXIM) has launched a Pan African Payment and Settlement Platform (PAPSP) at the African Union Extraordinary Summit in Niamey, Niger.
This initiative is part of the African Continental Free Trade Area (ACFTA) which is designed to bring 1.3 billion Africans and create a $3.4 trillion single economic market. The initiative has the following operational instruments: Rules Of Origin Portal, Tariff Concession Portals, Portal On Monitoring and Elimination of Non Tariff Barriers, Digital Payments and Clearing System, and African Trade Observatory Dashboard.
See it this way: if Nigerian Naira and Ghanaian Cedi are settled and exchanged by PAPSP, directly, without going through London (Pounds) or New York (Dollars), transaction costs will go down. If that cost is very low even when efficient, there may not be a justification for many to look for fintechs when banks are just there with something very good. I do think banks will be strengthened as some critical infrastructures are built at continental level, eliminating any weak point they may have.
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This does not mean that fintechs will not add value; it simply means they have to find new selling points at the continental level. The intra-African payment is about going soon.
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As we improve our infrastructures, some of the entities created to take care of pressing needs will disappear; that’s natural anyway.
It doesn’t imply loss of jobs, rather it’s a sign of growth and development, and on the balance, more economic activities and higher participation.
Of course the capabilities acquired in the course of running small/medium enterprises will be useful in the big things ahead.
Let the evolution continue.
Absolutely – evolution indeed. We need it at scale in Africa.