Financial technology has experienced advancements in the East Africa region redefining how people transact and businesses accept payments.
When you consider where we are now compared to 5-10 years ago, it’s clear that change within the fintech world is rapid. Technological advancements have prompted modern customers to look for simple and convenient ways of making payments. Looking ahead, with all factors remaining constant, it is expected that the fintech space will continue to evolve rapidly. We share the predicted digital payment trends for 2024.
Buy Now, Pay Later (BNPL)
BNPL options have gained popularity due to their easy access to credit and flexible payment plans beyond the traditional 30-day schedule, which appeals to many consumers. Harsh economic times and escalating inflation rates have also made more households in Africa embrace the solution as the traditional methods of purchasing goods and services have become increasingly burdensome. The ability of clients to access products and services without immediate financial strain has made BNPL stand out in the market. This shift is not merely a passing trend but a fundamental adaptation to economic hardships, as consumers seek flexible payment solutions that align with their budget constraints.
BNPL's popularity is expected to increase in the coming years if the economic challenges persist. With inflationary pressures showing no signs of abating, consumers are likely to prioritize financial flexibility and affordability. Studies have also shown that millennials and Gen Z are the prime demographics for BNPL. As the two categories dominate the market, BNPL's popularity is expected to continue its upward trajectory.
Cross Border Payments
Cross-border payments are financial transactions that occur between parties located in different countries. However, in Africa, cross-border payments have faced numerous challenges making it hard for businesses looking forward to expanding in new markets. Regulatory frameworks and lack of a standardized financial infrastructure create a complex and often cumbersome environment for businesses to operate.
Cross-border payments are poised for significant growth in 2024, driven by a combination of technological advancements and the willingness of African countries to remove the hurdles hindering businesses in different countries. The move will help Small and Medium Enterprises (SMEs) that depend on imports from suppliers in other countries to meet their local production, sales or reexport goals.
Digital wallet trends
In East Africa, digital wallets have experienced a notable surge in popularity, driven by the region's increasing smartphone penetration and a growing demand for convenient and secure financial services. Mobile money platforms, such as M-Pesa in Kenya and similar services in other East African countries, have played a pivotal role in shaping the digital wallet landscape. These platforms allow users to store money digitally, make payments, transfer funds, and even access credit services, providing a financial lifeline to individuals who may not have had access to traditional banking. The digital wallet trend in East Africa has been characterized by a shift towards cashless transactions, fostering financial inclusion and enabling individuals, especially in rural areas, to participate more actively in the formal economy.
Looking ahead to 2024, the trajectory of digital wallets in East Africa is expected to continue on a growth path. Advances in technology, coupled with ongoing efforts to enhance regulatory frameworks, are likely to contribute to the expansion and diversification of digital financial services. Increased collaboration between financial institutions, fintech companies, and telecommunications providers is anticipated, leading to the development of innovative solutions and the integration of additional features into digital wallet platforms. As the region continues to embrace the digital economy, one can expect a broader range of services within digital wallets, such as insurance, investment options, and more extensive merchant partnerships.
Peer-to-Peer Payments
While Peer-to-Peer (P2P) payments have not been as prevalent in East Africa, there is a growing expectation that they will gain substantial momentum in 2024, particularly among the younger demographic frequenting clubs, bars, and restaurants. The shift is likely to be fueled by the desire for more convenient and instantaneous payment methods. As digital literacy continues to expand, young consumers are becoming more accustomed to mobile-based financial transactions, creating an environment conducive to the widespread adoption of P2P payment platforms.
In social settings such as clubs, bars, and restaurants, the convenience of P2P payments can streamline the settlement of bills among friends or split costs for group activities. Mobile apps and platforms that facilitate seamless money transfers are expected to cater to the social preferences of the younger generation, providing a quick and efficient way to handle financial transactions in real-time. The anticipated surge in P2P payments in East African social scenes reflects not only the technological advancements in the region, but also the changing preferences and behaviors of the youth, who are increasingly seeking digital solutions for their everyday financial interactions. As these trends continue to evolve, the landscape of financial transactions in East Africa is likely to witness a notable transformation, with P2P payments playing a more prominent role in the social and economic fabric of the region.
