The impact and scale of the disruption caused by the rapid rise in integrated electronic payments solutions and value-added services is amplified in Africa, compared with mature economies, as consumers and companies continue the shift from cash-based payments.

While the trends differ for each country, the continent is experiencing significant growth in electronic payments, a high degree of disruption and an increased speed of transition, according to Boston Consulting Group’s (BCG’s) twenty-first yearly ‘Global Payments Report’.

The report highlights how payments have become more accessible, with innovations such as digital wallets, QR codes and mobile money, which is accelerating financial inclusion in developing economies.

The growing ecosystem has attracted more than 5 000 payments-focused financial technology (fintech) companies into the payments space globally, which account for about $100- billion of total industry revenues. By 2030, this revenue could grow to $520-billion.

Africa, where the top six fintech hubs comprise 681 companies, is predicted to be the fastest- growing fintech market between 2023 and 2030, with revenues rising by 13 times, compared with the global average of six times.

BCG South Africa senior partner and MD Tijsbert Creemers said in a statement following the release of the report that Africa is “the place to be” for global payments, with rapid growth enabling banks and fintechs to invest in modernising technologies and innovate new breakthrough solutions.

“We have seen the advanced speed at which regulators, banks and fintechs have worked to enable new payment solutions. These solutions not only enable opportunities for the private sector, but also play a crucial role in the continent’s economic development,” he says.

“Locally, this is true too in South Africa, where we see strong global capabilities and solutions for clients, many of which have been created with the banking sector collaboration in a nonmonopolistic environment.”

The ‘Global Payments Report’ shows that, of the total $1.6- trillion payments revenues globally, which increased 8.3% from 2017 to 2022, South Africa accounted for $10.3-billion, growing 6% from $7.8-billion in 2017, and is expected to grow to $22- billion by 2032.

This creates further opportunity for disruption, with challenger financial institutions coming into the market and driving new value propositions, as was seen with the introduction of PayShap in South Africa in March, with the real-time payment solution unlocking further long-term opportunity to create deeper financial inclusion solutions.

However, globally, the operating environment is likely to become more difficult, as valuations have dramatically declined over the past two years and the macroenvironment has become more turbulent, the report outlines.

Globally, revenue growth is likely to slow to 6.2% a year until 2027, when revenue will reach $2.2-trillion. Of this, transaction revenue from card and account-to-account payments rails to grow by 7.1%, while nontransaction revenue from interest- and fee-based sources is likely to increase by 5.7%.

Africa, however, is expected to continue to experience double-digit growth, owing to its unique operating environment and opportunities.

The report further points to regulatory authorities increasing their scrutiny of payments, expanding the rules and enhancing enforcement, in addition to declining total shareholder returns (TSR) globally.

The TSR of the 20 largest global payments companies experienced an average decline of 20% during the past two years, with acquiring and payments processing reporting the sharpest declines, with TSR falling globally by about 40%, BCG outlines.

“Our analysis shows that institutions must put aside practices that no longer serve their stakeholders and instead thoroughly modernise their technologies, techniques and tactics. Those that undertake this work now can turn disruption into a source of long-term advantage,” says Creemers.

“Technology modernisation is intensifying, and generative artificial intelligence (GenAI) is exploding on to the payments scene. Both could transform payments,” he says, adding that, in product development alone, GenAI-enabled software coding could boost productivity by 20%.

Further, digital currencies are moving from concept to reality, as more than 90% of central banks are actively experimenting with them as complementary to cash.

“At current rates of development, retail and wholesale central bank digital currencies could be operational in some countries in every region in five to ten years.”

The report also highlights that mergers and acquisitions, an important lever, are shifting from megadeals to capability-led moves, with a particular emphasis on alternative payments methods, integrated software vendors, value-added services and loyalty.

“With disruption likely to intensify, leaders must refresh their strategy, revisit their partnership structure and modernise their technology infrastructure. Safeguarding shareholder value and cost excellence will be key to preserving and growing shareholder value,” the report concludes.