Africa’s Cashless Future is Nearly Here and It Might Not Be So Great
An American influencer on holiday in South Africa recently posted a viral video highlighting traveler misconceptions about Africa. In the video, she expressed astonishment at the number of cashless transactions taking place. “South Africa takes more Apple Pay than even in the United States,” the TikToker said. As one of the most industrialized countries on the continent, cashless payment systems have been commonplace in South Africa for several years. The rest of the continent, however, is still operating with mostly cash and this is the central challenge to the wider expansion of financial technology across Africa.
In a new report, Mckinsey forecasts the African fintech sector to grow dramatically in the short term. Fintech revenue could reach $30.3 billion by 2025, which is eight times higher than revenue in 2020, as more Africans gain access to the internet. Roughly two-thirds of Africa’s 1.3 billion people don’t have a bank account or full access to financial services according to McKinsey. More than 90 percent of all financial transactions are cash-based, which creates a major opportunity for fintech companies and governments.
Breaking the continent’s addiction to fiat cash appears to be the last barrier to a full-blown digital revolution considering Africa’s fast-growing population and smartphone penetration. But signing up people for bank accounts is much easier said than done. Moving to a cashless society requires advanced identification standards such as biometrics.
The introduction of these systems has been slow and fragmented in Africa. In many cases, the cost of setting up and maintaining a biometric database is prohibitive. This problem was recently solved in India, which has ambitiously embraced a cashless future, through the privatization of its national biometric identity system known as Aadhaar. The system can be used for many different services across the economy, such as opening bank accounts, withdrawing money from ATMs, applying for a driver’s license, and receiving government subsidies. But Aadhaar hasn’t been without its critics who have highlighted several serious privacy and cybersecurity flaws with the database.
India has taken other major steps to pull its cashless future forward. In November 2016, the…