In spite of more than two decades of financial reforms, African payment systems to transact trade and business have remained very cumbersome, underdeveloped, fragmented, costly and inefficient. That has remained a key impediment to intra-Africa trade and an obstacle in way of the completion of single market in the continent in its quest to achieve a common market. While, for instance, it takes just a few minutes to wire money from one corner of world to another, to transact business payment across borders in Africa may take days, weeks or even months. Indeed, a lack of cost-effective payment systems in the region has proved very costly both in terms of resources and time to most business men and women in the region. Consequently, since independence, this has remained a key challenge to intra-African trade.
A number of factors are at play as to why Regional Payment Systems have remained dismal and underdeveloped for the past 50 years. Large parts of Africa are geographically disadvantageous, with forty percent comprising of islands or landlocked economies. Most African economies are cash based involving a lot of paperwork to effect payments and transact business across borders, rendering the payment system very costly and inefficient. As a result, finality of payment is not always guaranteed due to potential counterfeits and the lack of financial discipline. In addition, most payments system in Africa are very small, fragmented and lack competition resulting in low inefficiencies, high payments costs and exorbitant bank charges.
Notwithstanding Africa’s sluggish, underdeveloped and inefficient payment system that has hindered intra-African trade, which by extension, limit economic growth and development; well-developed and cost-effective payment systems in general have many good attributes and benefits to the economy as whole. As elsewhere, development of payment systems is closely associated with the movement of goods, services, capital and people; reduces costs and delays of effecting transactions as well as minimizing the risks of holding cash such as theft, currency counterfeit and losing of interest and exchange rate value. Moreover, there more benefits accrue to well developed and efficient payment system both directly and indirectly at national, regional and global level.