Africa is a vast continent with huge potential in the payments space. We caught up with Abdeslam Alaoui Smaili, CEO of HPS, a multinational provider of payment solutions, based in Morocco, to discuss innovative services, financial inclusion and how his company is using blockchain there for social good.
The first name that springs to mind when you put ‘payments’ and ‘Africa’ together is Kenyan money transfer and micro-financing service M-Pesa, which has quickly become the world’s largest mobile money network, enabling millions of Africans to access safe and secure banking solutions.
But there’s more to digital payments in Africa than M-Pesa. Much more. Ecobank Group, a leading pan-African financial institution, recently highlighted that mobile money payments of all kinds have grown exponentially, while the Central Bank of Nigeria has tried promoting a cashless society by imposing charges on cash withdrawals over a certain amount. According to Statista, the number of electronic payment transactions in Nigeria had already grown from 66 million in 2008 to more than two billion in 2018.
In terms of absolute numbers, the digital payments market has matured faster in Africa than it has in Europe – however, it’s a mixed picture across the continent. A 2019 World Bank report pointed to the near-340 million adults in Sub-Saharan Africa who still do not have an account at a financial institution. One barrier to financial inclusion is access to digital technology. While mobile phones have been central to the region’s achievements, device ownership is twice as high among wealthier adults than poorer adults in Democratic Republic of Congo and Madagascar, for example.
Nonetheless, analyses suggest that Africa will be the first continent to experience real mass adoption of mobile payments. According to the Bill and Melinda Gates Foundation, by 2030 more than two billion people from regions with inadequate banking services will be using mobile payments on a daily basis. And more than 40 per cent of new users will be in Africa.
There are significant international efforts underway to address the disparity of financial inclusion in Africa and help level the playing field. The UK Government, for example, is piloting a new programme that will link tech communities in the UK and Africa to accelerate the adoption of financial services and create a solid platform for future trading. In the first 12 months, a UK-Africa Tech for Growth community will be set up to help increase access to financial services and devices for the unbanked, with partnerships between British and African tech and finance firms heavily promoted.
More and more African banks are pivoting to a mobile-led, digital transformation strategy to help them reach more customers. Many are looking to an established ‘broker’ such as HPS to facilitate alternative payment services, linking up through application programming interfaces (APIs).
Out of Africa
Born in Morocco, which has a fairly sophisticated electronic payments system and acts as a great hub from which to expand across the Mediterranean, payments software company HPS has rapidly grown into a global organisation. But it retains a particular affinity with Africa.
“We started in Morocco but very quickly went beyond it,” says CEO Abdeslam Alaoui Smaili. “Our first customer was a Moroccan bank, the second was a Kuwaiti bank and the third was a Cypriot bank. This gave a level of respectability to our products and services. The more mature we’ve become, the further we have been able to go.”
In 2018, the company launched an open banking platform, providing a rich set of application programming interfaces (APIs) that enables fintech innovators to easily build innovative payment applications on banks and other large financial institutions’ existing systems. Today, the national interbank associations in Morocco and Ghana, as well as the West African GIM-UEMOA interbank group, use PowerCARD, HPS’ digital payments platform. It’s increasingly seen as an industry benchmark.
“What’s made our positioning a bit different is that we have invested a lot to have just the single stack,” explains Alaoui Smaili. The approach allows HPS to go to multiple markets with the same core solution that is infinitely customisable.
“So, when we were in Japan, we had to include some functionalities that are very specific to Japan. When we were in France, there was something else needed for that market, and so on. When we then went to Hong Kong, we were offering them what was in Japan and France, and they said ‘this is really brilliant’,” says Alaoui Smaili. “By retrofitting all these functionalities that we have all over the world, we’re able to bring the experience that we’ve acquired into each new country. I think this is really what makes us very strong and competitive.”
HPS’ latest contribution to the industry and to African development was cemented in May 2020, when it completed the modernisation of South Africa-based financial services group Absa’s African operations outside of its home nation. The journey started in July 2019 with HPS replacing existing legacy systems with PowerCARD in eight countries where Absa operates: Botswana, Kenya, Mauritius, Zambia, Tanzania, Ghana, Uganda and Seychelles. Absa Regional Operations has now also subsequently replaced its legacy merchant-acquiring settlement platform with PowerCARD.
Alaoui Smaili has no doubt that an innovative mindset has been the key to HPS’ success. “I think it’s a matter of will,” he says. “Does the company have innovation in the blood, in its DNA, or not? In the payments space, if you don’t innovate, you can be sure somebody else will. Necessity is the mother of innovation, of course, and each time we have new software, each time it goes faster, we need to sell faster. This makes for a very effervescent industry and every day we have to address a new challenge and offer a new user experience. That is extremely exciting for us,” adds Alaoui Smaili.
Blockchain for good
Being able to accept payment from customers through the latest – and the customer’s preferred – method of transaction is becoming an important way to build customer loyalty, particularly in emerging markets like Africa where the payments sector is increasingly digitised. There, HPS is helping financial institutions to give individuals much more choice, freedom and a route to a better life.
This ethos underpins the company’s newest proof of concept with the Moroccan government, which uses blockchain technology to enhance financial inclusion. It allows citizens in receipt of state benefits to make purchases through their bank for goods that are subsidised by the state.
Working with the Moroccan central bank, the system removes the stigma associated with state benefits while also eliminating intermediaries in the payments chain who would normally take a charge ‘without really bringing value’, says Alaoui Smaili. “That’s the beauty of technology – it makes the unnecessary layers disappear.”
This initiative promises a seamless experience for all stakeholders. Merchants immediately get paid the full amount for a purchase by the citizen’s bank, which can directly retrieve the portion due from the state. The innovative solution also enables the Moroccan government to easily identify which citizens are legitimately using the benefits, reducing fraud and costs, and boosting efficiency.
No let up
COVID-19 may well alter the speed of change when it comes to payments, but it won’t affect the ultimate destination. Africa is backing digital, and Alaoui Smaili is bullish about the future. “We’re seeing more interoperability in the industry, and electronic payments are really gaining in the emerging markets,” he concludes.
“These developments are bringing exciting new opportunities day-by-day and I think, with the talented men and women that we have working in the industry, we are producing something really interesting.”