Trust In Digital Payments Systems: How Consumer Recourse Mechanisms Can Accelerate Africa’s Inclusive Digital Transformation

By Sabine Mensah

Estimates show that more than 350 million adults in Africa are not part of the formal financial system. This situation, which is worse for vulnerable populations, such as women in rural areas and young people, leaves them reliant on costlier, riskier informal financial systems. It also exposes them in case of economic shocks which can constrain them in a vicious cycle of poverty. 

Making digital transactions safer, affordable and accessible to these excluded segments of the population can provide the needed incentive to shift from a cash economy to digital financial services. Besides enabling them to have a digital wallet and transact, it can serve as a gateway to enjoy other financial services such as remunerated savings, credit and insurance. 

With digital financial systems, communities can also gain better access to amenities such as energy, affordable housing, transportation, and water and sanitation. Facilitating the financially excluded to use digital financial services will reduce their vulnerability to shocks, improve the quality of their lives and deliver inclusive, sustainable development.

What does it take then?

For customers to shift to digital finance services, they need to trust that digital payments provide more benefits than cash, and that the systems will work every time and everywhere. The flipside of trust is recourse. Knowing that even if the systems fail, that they will not lose, that there will be a process to resolve issues and protect their hard-earned money. 

Recently, my trust in the digital ecosystem was almost shaken. Last Saturday, I was in a store in Nairobi where I live and loyally use digital financial services. In the process of initiating payment on my mobile wallet, I typed-in the wrong paybill number (a code that identifies the merchant’s account in the system). After confirming the transaction, I realised from the confirmation receipt message that payment had gone to a wrong merchant. I immediately called the provider’s customer service line and was directed to submit my confirmation text message via SMS. The response came that my payment request was received and, since then, nothing else. By the following Tuesday I had given up any hope of ever getting my money back. Only to receive a message the following day from the digital finance service provider that my reimbursement request was approved, and my mobile wallet’s balance increased. That certainly did better than losing my cash in a store. I have since been praising the provider all around my networks and friends. 

How about communicating the benefits and recourse mechanism!

Although this turned into a positive outcome for me in the end, the uncertainty of not knowing, with nobody to consult and no information on the process had shaken my faith. This was enough for any new customer to revert to the cash economy. AfricaNenda has been championing inclusive payment systems for the continent. Since 2021, we have been actively leveraging our expertise, knowledge, and extensive network to contribute to the development and scale-up of inclusive instant payment systems at the national, regional, and continental levels. Our commitment to this agenda stems from a deep understanding of the transformative potential that digital financial services hold for Africa’s economic growth and prosperity. At the core of this vision is upholding inclusive governance of payment systems, particularly with regards to trust. 

In the end, it is all about gaining consumers’ trust.

Digital financial services have the potential to revolutionize Africa’s development landscape. For example, getting farmers onto the digital financial system can unlock fundings to invest in boosting productivity, while insuring their crops and livestock against bad weather and other risks, thus helping to tackle hunger. Households can conveniently save for quality education and tackle medical emergencies through solutions such as micro-health insurance.

For all people on the continent to tap into the benefits that come with financial inclusion, the technology has to be affordable and accessible for them to enjoy, regardless of income levels, location and purpose of using it. All digital financial service providers, banks and non-banks, need to invest more in affordable, accessible customer centric solutions. Recourse mechanism need to be in place, transparent, efficient and resolution oriented for customers. Incentives are necessary to extend the coverage of digital finance infrastructure even to places that are currently excluded due to lack of a strong business case. Governments have a role to play by attracting private sector investment through strategic de-risking measures and regulatory reforms to create a conducive and predictable policy environment.

Africa’s digital transformation needs to be inclusive.

Furthermore, it is crucial to develop relevant solutions that directly address circumstances of the financially excluded and meet their specific needs. These solutions should be tailored to their unique challenges and designed to provide tangible, meaningful support. This requires innovations to tap into the continent’s rich talent and set up homegrown digital financial systems that are instant, affordable, interoperable, and inclusive. 

Collaborations among governments, private sector, regional economic communities, development institutions and academia can drive necessary partnerships to deliver these solutions. Building awareness and understanding the digital financial landscape are essential, and the annual State of Instant and Inclusive Payment Systems report, released by AfricaNenda provides valuable insights for guiding such interventions and promoting progress. 

Digital financial systems can leapfrog inclusive development, so investments need to be targeted at plugging in everyone on the continent. To make this happen, top on the priority list should be making digital payment systems more inclusive to onboard the more than 350 million African adults who still remain excluded from formal financial ecosystems.

Sabine Mensah is the Deputy Chief Executive Officer at AfricaNenda.

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