New McKinsey research estimates that while cash is still king in Africa, the e-payments market is likely to grow by more than USD 40 billion in revenues from domestic payments alone between 2020 and 2025, with about 188 billion in transaction volumes.
The research was published in a new report, The future of payments in Africa, and unpacks how demand from consumers and businesses, innovations, entrepreneurs, regulators, and capital are reshaping Africa’s fast-growing electronic-payments landscape. It also highlights the challenges and possibilities for traditional and non-traditional players looking to find their niche in this rapidly evolving and increasingly competitive landscape.
In 2020, e-payments generated approximately USD 24 billion in revenues, of which about USD 15 billion was domestic electronic payments from 47 billion individual transactions totaling just over USD 800 billion of transaction values. However, on average, only 5 to 7 percent of all payment transactions in Africa were made via electronic or digital channels.
According to Edem Seshie, an Associate Partner in McKinsey’s Lagos office, e-payments constitute a significant growth opportunity on the continent, especially as the convenience and scalability of payment methods improve and support infrastructure develops.
“Enduring pain points coupled with shifts in consumer and business behavior, as well as supportive government and regulatory environments, are opening up unprecedented opportunities for the acceleration of e-payments in Africa. Local, global, traditional, and new players are all innovating to capture the USD 40 billion of revenue potentially at stake by 2025. This is an exciting, complex, and evolving market with tremendous growth prospects, and we can expect to continue seeing a new generation of winners emerge and scale,” says Seshie.
The key highlights include the compound annual growth rate (CAGR) of revenues for online payments will likely exceed 30 percent, possibly reaching about USD 13 billion in 2025, meaning revenues will more than quadruple between 2020 and 2025. Moreover, the cards and wallets could account for nearly 40 percent of revenues, respectively, with account-based payments accounting for less than 25 percent.
The research further reveals that around half of future electronic-payments revenue will likely come from Egypt, Ghana, Kenya, Nigeria, and South Africa, with the fastest growth in Nigeria, at 35 percent per year.Other countries that couldsee electronic-payments growth above 20 percent per year include Ghana, Ivory Coast, Kenya, Senegal, and Uganda. South Africa is likely to represent a smaller share overall while remaining the biggest e-payments market in Africa in 2025, with USD 5 billion in annual revenues.
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