In recent years, e-commerce has seen phenomenal growth in Africa. With the advent of mobile technology and increased internet access across the continent, more Africans are embracing online shopping. However, one crucial aspect that drives this growth is mobile payments on technology platforms.
The acceptance and use of digital channels across Africa are rapidly increasing, experiencing their highest adoption rate in history. Africa is currently one of the fastest-growing consumer markets in the world. According to the Economist Intelligence Unit, the continent will be the world’s second-fastest-growing major region in 2024, just behind Asia. In the last decade, e-commerce has experienced phenomenal growth rates worldwide, with e-commerce sales projected to grow to USD 7 trillion globally this year.
Across Africa, the retail landscape is undergoing a significant shift as contactless payments and mobile money become widely integrated. Consumers in many African countries are increasingly embracing these methods for transactions. This transformation is particularly evident in Sub-Saharan Africa (SSA), a region with immense growth potential despite being one of the smallest e-commerce regions in the world.
The COVID-19 pandemic accelerated a major digital transformation across Africa, leading to a significant and sustained rise in the demand for digital payments. As a result, digital payments have become an essential feature in the continent’s financial landscape. One of the most significant developments in alternative payment methods in Africa continues to be the rise of mobile money.
The phenomenal growth of mobile money in Africa can be attributed to three key factors: increased access to technology, challenges in accessing traditional financial services, and the pandemic-driven rise of contactless payments. In Sub-Saharan Africa, 171 active mobile money service providers are at the forefront of transforming consumer transactions. Notably, key players such as M-Pesa (by Safaricom), MoMo (by MTN), and Orange Money dominate the market share.
Mobile money services have gained widespread adoption across the continent, with countries like Kenya and Ghana leading the way. In Kenya, for instance, mobile money platforms have revolutionized the way people transact, with transactions made via mobile wallets equivalent to a significant percentage of the country’s GDP. This success can be attributed to high mobile phone penetration, limited traditional banking infrastructure, and the affordability and convenience of mobile money services.
Cross-border transactions have played a key role in driving e-commerce in Africa, making up more than half of all e-commerce transaction volumes in Sub-Saharan Africa. A portion of these cross-border volumes comes from consumers accessing the rising domestic African e-commerce players across local borders, such as Jumia (Nigeria), Kilimall (Kenya), and Takealot (South Africa). Domestic e-commerce provision in Sub-Saharan Africa is still in its early stages, presenting an opportunity for the region to develop its own big players in the market and enhance the continent’s connection to the rest of the world.
B2B e-commerce platforms in Sub-Saharan Africa are thriving because they have overcome consumer trust and logistics issues by working with and tapping into informal markets rather than working around these sales channels. This approach allows B2B platforms to provide goods into remote regions, well beyond urban areas, and layer online sales onto the existing network of informal retailers.
Despite the rapid growth of digital payments, challenges remain. Rising inflation means that individuals have less discretionary income and tend to spend less money on luxury products. Price becomes the leading factor in decision-making for many consumers, leading them to brick-and-mortar retailers and informal markets that mainly trade in cash to secure goods at lower prices.
Additionally, the infrastructure, regulations, and overall payment ecosystem have not fully matured to support the optimal development of payment services and remittance flows across the region. According to The State of Instant and Inclusive Payment Systems in Africa – SIIPS 2022 report, functionality pain points erode trust, and the lack of inclusivity translates into sub-optimal usage.
However, the potential for e-commerce in Africa remains significant. Estimates suggest about 264 e-commerce start-ups are operational across the continent, active in at least 23 countries. This indicates a significant potential to create new jobs – as many as three million by 2025. These jobs will be directly in online marketplaces, supporting services and spin-off economic activity.
As the e-commerce sector becomes increasingly competitive, retail businesses need to adjust their approaches to include providing more value propositions for their main audience, localized e-commerce solutions, and engaging more with a younger generation of consumers. The digital payment revolution in Africa is quietly unfolding, driven by the surge in mobile phones, the drive for financial inclusion, and the push for digital transformation. As Africa continues to embrace digital payments and e-commerce, the continent is poised to become a major player in the global digital economy.
