Africa: How Decentralised Payment Networks Are Poised to Transform Africa’s Financial Landscape

Over the past two decades, Africa has experienced a dramatic transformation in digital payments. In 2022, digital payment transactions across the continent surged to an impressive $137.28 billion, reflecting Africa’s rapid adoption of financial technology and mobile payments, which have become essential for driving economic inclusion.

Countries like Nigeria have made remarkable strides in this sector. A combination of government policies and private sector innovations has propelled the widespread adoption of digital payments. The Central Bank of Nigeria (CBN) has played a pivotal role through initiatives like the National Financial Inclusion Strategy and the Cashless Nigeria Policy, which was introduced in 2012 to reduce the reliance on physical cash and promote electronic payments.

While Nigeria has excelled in online payments, Kenya remains a global leader in mobile money, largely due to the success of M-Pesa. With over 51 million users across Africa, M-Pesa facilitates transactions exceeding $314 billion annually, further underscoring the continent’s progress in digital payments.

However, despite these achievements, Africa remains heavily cash-dependent. According to McKinsey, 90% of transactions across the continent are still conducted in cash, signaling a significant opportunity for further growth in digital payments. Yet, this reliance on cash also highlights the challenges facing Africa’s current payment infrastructure. While there has been commendable progress, the system still faces critical shortcomings. Notably, three out of every ten digital payments in Africa fail, leading to an estimated $14 billion in lost revenue for digital businesses annually.

For instance, Nigeria, with one of the most robust payment infrastructures in Africa, saw a significant increase in failed transactions during a cash shortage in 2023 when digital payments surged. This suggests that as digital payments continue to grow, the rate of failed transactions may increase, leading to further revenue losses and diminished trust in the system.

Cryptocurrencies have been suggested as a potential solution, offering speed and transparency. However, their lack of regulation poses a significant challenge. Even globally recognized crypto solutions like Ripple have encountered regulatory issues.

In Africa, however, a promising alternative is emerging. Zone is leveraging the underlying technology of cryptocurrency—blockchain—to create a secure, transparent, and regulated payment infrastructure. Instead of disrupting Africa’s financial ecosystem, Zone is building a space on the blockchain for financial institutions (FIs) and regulators to operate harmoniously.

Zone’s approach is both innovative and practical. Its regulated blockchain addresses a key issue that plagues FIs: the reliance on intermediaries for transactions. By enabling FIs to connect and transact directly with one another on a decentralised network, Zone eliminates the costs, delays, and friction associated with intermediaries. Regulators can also join the network, monitoring transactions in real-time to ensure compliance.

This solution has gained significant traction, particularly in Nigeria, where Zone has onboarded major financial institutions and collaborated with the Nigeria Inter-Bank Settlement System (NIBSS), a key regulatory entity.

While the potential for decentralised payment networks like Zone to revolutionise Africa’s financial future is undeniable, only time will reveal whether these systems can fully support the continent’s growing digital payment ecosystem. As Africa continues its digital transformation, decentralised networks could play a pivotal role in reshaping the financial landscape.