Exclusive: ‘Continental shift’ – Vanessa Olver, Absa Group in “The Paytech Magazine”
Vanessa Olver, Chief Enablement Officer at Absa Group, discusses African cooperation and the changing landscape for payments
Africa is a continent on the move. Bold steps are being taken to remove boundaries and promote economic integration, while mobile money is being adopted more enthusiastically than anywhere else in the world. And now, of course, COVID-19 is acting as a stimulus for further digital acceleration.
Technology has been a driving force across Africa for a number of years; payments have been instant in much of sub-Saharan Africa since 2010. And when it comes to financial inclusion, it blazed a trail way back in 2007 with the launch of the M-Pesa mobile money service in Kenya. This created a mobile ecosystem that has expanded into every corner of the continent, spanning cultures and regulatory systems, so that nearly half of the world’s mobile money accounts held today are in Africa. Meanwhile, according to the United Nations Conference on Trade and Development, the number of online shoppers in Africa has surged annually by 18 per cent since 2014, while the GSMA, which represents mobile operators worldwide, says sub-Saharan Africa is mobile payments’ biggest market, accounting for 45.6 per cent of all activity globally in 2018.
“Well before COVID-19 boosted digitalisation, e-commerce and m-commerce were already on a steep upward curve in Africa,” points out Vanessa Olver, chief enablement officer for Absa Group, one of Africa’s largest providers of financial services where she has responsibility for operations and technology. “As a result, we’ve seen the growth of payments through initiatives such as digital wallets. Customers are beginning to us wallets to make payments for their everyday needs, which is a significant development.”
Africa isn’t leap-frogging the paytech milestones laid down by the West, it’s carving out its own journey. “For the last decade, Africa has been a model of disruption,” says Olver. “Fintechs and mobile network operators have stepped in with new payment methods, fulfilling customer needs more quickly than commercial banks, and disruption is happening in Africa faster than in many other parts of the world.” Some of that now, sadly, is a reflection of the ‘isolation economy’ brought on by the pandemic. While COVID-19 underscores the need for social distancing, technology means people no longer have to come together physically, which, Olver says, is pushing payments further towards remote and contactless solutions.
“In the next five years, big growth is predicted for e-commerce and m-commerce,” says Olver. “We’ll see contactless, or low-touch, payments increase across Africa because of developments such as QR codes being scanned via smartphones. “We’re a youthful continent,” she adds, “which clearly plays a big part in the adoption of new and cool technologies. Africans like things to be instant and simple, but they also expect banks such as Absa to provide safety. They want fintech speed and last-mile delivery to be backed by the safety of a traditional commercial bank, and, of course, they want smartphone solutions.”
Olver cites a McKinsey survey in Uganda that revealed there are more smartphones in that country than lightbulbs. “Just extrapolate that across the whole continent,” she says. “Cheap Chinese smartphones on the Android platform are what’s driving new tech and new types of payment.
“People don’t have the patience to stand in queues or hang around malls. Instead, everyone wants stuff on their phones. Technology platforms are supporting SMEs that promote B2B and B2C commerce, and they are working with banks to build the entire payments backbone. In my view, much of the future is being invented in Africa.”
Mobile network operators (MNOs) have an advantage over banks here because of their know-your-customer functionality. “MNOs can do KYC-lite,” says Olver, “while banks have onerous governance and control processes and can’t onboard as quickly for services such as digital wallets. The MNO advantage will become more apparent every day.” Which is why PowerCARD, the integrated payments platform from HPS, is seen as being key to Absa’s development of future financial services. The bank’s association with HPS, a Casablanca-based software company that provides electronic payment solutions for financial institutions, processors and national payment switches, followed Absa’s breakup with Barclays, which announced in 2016 that it would exit Africa. The separation was finalised in 2020, and Olver says there has been a smooth transition of payments architecture to the new PowerCARD platform.
“The big thing with this project was that the timeline was non-negotiable. What PowerCARD did was give us some of their best resources. They were flown in to South Africa, physically relocated with us, next to our teams, so we were able to make sure we all understood, in one common language, what needed to be delivered, and how to deliver it. “We did things in bite-sized chunks – a small country first, tried to get it over the line, did it very successfully, and eventually migrated all of our countries over, from a switch perspective. We then needed to move on to settlement, and settlement is far more complicated. All the schemes are involved, so we are dealing with Visa, Mastercard, China UnionPay, and getting all of those parties to work with us.
“Again, what HPS did, very successfully, was allocate their deepest subject matter experts to work on the project, and they were with us day in and day out. “We did dress rehearsals of the go-live events and I think that was our recipe for success in getting it over the line, which was well in advance of our June 2020 deadline.”
HPS completed the revamp of Absa’s African operations outside of the South Africa acquiring payments infrastructure last May for the eight countries where Absa operates: Botswana, Kenya, Mauritius, Zambia, Tanzania, Ghana, Uganda and the Seychelles. “HPS supports our business across Africa,” adds Olver, “and it’s helped us do a couple of things. One, it brings our acquiring business on to powerful next-generation technology. We were lagging behind, hampered by old technology, and now we have an up-to-date platform. Second, it creates a connected experience for payments. Whether it’s Google Pay, Android Pay, Apple Pay or other payment types, everything is integrated in a single backbone, powered by HPS.
“From a user experience and user interface perspective, it’s far more friendly and easy to navigate, whether backend or frontend. Through the merchant portal, we can provide merchants with a customised dashboard where they can monitor what’s going on between their businesses and the bank, and see what’s happening with customers and what volumes are coming through.”
Full visibility of flows
Because Absa is now building its business on a next-generation platform, it can make changes much more quickly and cheaply than before, notes Olver. And it means Absa can evolve and harness market innovations to meet new needs and customer demands.
“PowerCARD gives us clarity,” says Olver. “We can see transaction flows both internationally and domestically. Beyond that, we’re looking to HPS to develop QR codes, as everyone wants instant payments, and to develop biometric recognition. We’re working on instant payment projects in Mauritius and Zambia, and all these digital moves are very timely and relevant, given the increased need for contactless technology because of COVID-19.”
It is among the first institutions to go live with the Ghana Universal QR Code, developed by the Ghana Interbank Payment and Settlement Systems, which allows customers to scan displayed QR codes with their smartphones to pay, or dial displayed quick codes with their feature phones to make payment. While the PowerCARD platform allows Absa to integrate different payment mechanisms in-country, cross-border payment flows inside Africa are becoming increasingly important. Volumes have typically been from Africa to the rest of the world, and dominated by greenback dollars. Now there is a surge in intra-Africa transactions, and many will increasingly be conducted in local currencies.
There is an important economic backdrop to this changing payments landscape – namely the arrival of the African Continental Free Trade Area (AfCFTA). Set to become the largest free trade area in the world, AfCFTA brings 54 African nations together to form a single market for goods and services, encouraging the free movement of capital and people. It’s a big moment for the continent and one that, it is hoped, will help shift Africa away from reliance on foreign debt. Trading in the AfCFTA began on 1 January 2021, its introduction a timely response to the one of the biggest lessons of the pandemic – that to be resilient, Africa must be less reliant on global supply chains and focus on developing regional and local ones.
For Absa, the move reinforced the need for a payment architecture that not only facilitated B2B and B2C payments, but also inter-government and government-to-business transactions.
“Managing payments across Africa is at the heart of our business,” says Olver. “It’s what makes us an international bank. There’ll be a lot more focus on intra-Africa payments now, and I think we’ll be trading in different currencies, with people moving their money into different jurisdictions. It’s not all about the US dollar now. Interoperability is the key, and you’ll be seeing more solutions from us that focus on FX and the ability to move currencies.”
There are many facets to Africa’s digital journey. The new free trade area provides the framework for pan-African cooperation, COVID-19 is accelerating digitalisation, and Absa now has a strong partner with which to build digital services through PowerCARD. Add to this the demands of a youthful population, coupled with the desire of regulators and governments to push the digital agenda, and it’s easy to see why Olver believes the future is being invented in Africa.
Today, the Africa payments opportunity is estimated to be worth more than a trillion dollars. Players who can create connected experiences will dominate the market and help governments establish regional trade routes, funding them through instruments like cash management, bank guarantees, and trade finance. Absa is definitely counting itself among them.