Driving digital payments in emerging markets

Patrick Quantson

The World Payments Report (2017) predicts that global digital payment volumes are expected to increase by an average of nearly 726 billion transactions by 2020. Emerging markets are expected to be at the forefront, driving this payment transformation due to the unique dynamics that are peculiar to these markets. One of such peculiarities is the population and demographics of emerging markets.

Emerging markets as the IMF describes them are a group of about 30-50 countries that are in a transition phase—not too rich, not too poor, and not too closed to foreign capital, with regulatory and financial systems that have yet to fully mature. These countries are incredibly diverse—culturally, geographically, and even economically. Per this definition, many African economies can safely be described as emerging markets.

The emerging markets, the IMF says, are home to 85% of the global population, amounting to some 6 billion people. What is even more profound about this fact is the demographics of this population. A whopping majority of the population in emerging markets are young people between the ages of 15 and 34 who are also very tech-savvy. While this presents some challenges for business and policy makers in these economies, it also presents an opportunity for the development of innovative ways of reaching this young population.

People within the 15–34 age group are known to have a strong appetite for new and innovative technologies. They are people who want to be unique and treated specially. They want businesses to provide personalized solutions that speak to their personal aspirations and goals. They have been described as a narcissist generation who are preoccupied with things that make them stand out of the clutter.

Yet this is the tech-savvy generation whose demands, attitudes and preferences are transforming digital solutions from being a convenience to an essential part of how people live their lifestyles. One can confidently state that the high population of young and tech-savvy consumers in emerging markets are raising the need for innovative and cutting edge technology that integrates deep customer insights.

 

Figure 1: Internet Penetration in Ghana as at January, 2018

 

In Ghana, data on internet penetration, as shown in Figure 1, shows that internet penetration is at 35% in 2018 from a little over 5% in 2013 and this figure is bound to grow in the coming years. Persistently these individuals are going to demand new and innovative services that are in consonance with their ‘techy’ lifestyles. Their comfort with technology is driving businesses
to provide new and more innovative ways of enabling transactions, reflecting the demands of this tech-savvy generation and Fig 2 below shows a very clear trend that’s unfolding:

The demands of a young and tech-savvy generation present an opportunity for governments, regulators, businesses and banks to evolve innovative ways of making businesses transactions both convenient and easy. The recent proliferation of FinTechs in these markets is testimony of the kind of response required to fulfil the needs of the population of emerging markets.

The emerging markets, in staying relevant to the needs of a young, dynamic and somewhat complex population constantly have to innovate in payments, from using low cost mobile money for remittances to enabling social banking to further deepen financial inclusion. Mobile financial technology providers, banks and fintechs are leveraging the exponential growth of the mobile device as a ubiquitous communication device that enables payments across emerging markets, coupled with the assurance of security and ease of use, to provide impetus to the growing cashless economy supported by regulators.