Africa on the Cusp of a FinTech Revolution
Ravi Menon, Singapore's Ambassador for Climate Action and Senior Adviser, National Climate Change Secretariat (NCCS)
Opening Address at 3i Africa Summit, Accra, Ghana
13 May 2024
Your Excellency the President of Ghana, your Excellency the Prime Minister of Grenada, Ministers, Central Bank Governors, distinguished guests, ladies and gentlemen, good afternoon. All protocols observed.
l am delighted to be here at Accra for the 3i Africa Summit 2024. It is fitting that we are holding this Summit in Ghana, the first country in Africa where the entire population is able to access and receive payments through their mobile phones.
The Promise
Africa is at the cusp of a FinTech revolution that will transform the lives of hundreds of millions of people.
The Challenge
The potential is huge and the enablers are in place. But it is not a given that Africa’s FinTech revolution is predestined.
Africa has considerable challenges to overcome on its FinTech journey.
But Africa is not sitting still. Efforts are underway to tackle each of these challenges:
Let me elaborate.
Digital Identities
Digital IDs are a crucial public good to enable financial inclusion. Efforts are underway at the country, regional, and pan-African levels.
Several countries in Africa are implementing digital IDs.
At the regional level, the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC) have been working on regional digital IDs.
Building on these initiatives, the African Union has plans for an interoperable pan-African digital ID. This will be a stepping stone to building the Single Digital Market in Africa - a bold vision of a unified digital ecosystem that provides individuals and businesses across the continent with seamless access to digital services.
A pan-African digital ID is a powerful enabler for a digital economy.Payments Connectivity
Next, payments connectivity.
The Pan African Payment and Settlement System (PAPSS) is an interesting innovation.
Another notable initiative in electronic payments is Onafriq.
These are interesting innovations in Pan African payments connectivity. The key task ahead is to integrate these innovations with existing national payment rails for seamless multi-lateral payment connectivity across Africa.
Here, the role of Central Banks is critical. They must ensure effective governance and interoperability while leveraging off existing innovations like mobile money and PAPSS.
Tokenised Assets and Digital Money
Third, tokenised assets and digital money to drive financial inclusion.
Distributed ledgers and tokenisation are being used to create a more efficient global financial architecture for seamless financial transactions across the world.
Digital assets ride on the technological innovation of tokenisation, namely the use of software programmes to represent the ownership rights over any item of value as a digital token.
Tokenisation is relevant to Africa.
There are interesting and inspiring examples of tokenisation in Africa which have enhanced financial inclusion. Let me cite a couple.
Digital money enables the payment, clearing, and settlement of digital or tokenised assets simultaneously on the same platform. The three viable forms of digital money in terms of stability of value and security of redemption are central bank digital currencies or CBDCs, tokenised bank liabilities, and well-regulated stablecoins.
CBDC-based transactions can be used on simple feature phones, thereby helping to accelerate financial inclusion for the unbanked and underbanked.
Not surprisingly, in Africa, most of the traction in digital money has been in the CBDC space.
The Bank of Ghana is currently testing a general purpose or retail CBDC.
Artificial Intelligence
Finally, artificial intelligence. AI is fast emerging as a game-changer and disruptor in global FinTech. Major jurisdictions across the world are establishing principles and guidelines for the responsible and safe use of AI.
In Africa, AI can help FinTech players who are already harnessing AI in many ways. Let me give a few examples.
Foundational Digital Public Infrastructure
Many of the key components for a FinTech ecosystem are falling into place in Africa. How can Africa build on these to systematically accelerate the FinTech transformation and integrate with the global fintech ecosystem?
The time is ripe for Africa to create a next-generation Foundational Digital Public Infrastructure (DPI) architecture, consent-based and pan-African.
This architecture should rest upon three pillars:
This pan-African DPI could leverage a range of next-generation components, like Tokenised Assets, Digital Money, Universal Trusted Credentials, Interoperable Distributed Ledgers, and Artificial Intelligence.
There are three enablers for successful rollout:
This is an ambitious undertaking. It will require high-level guidance and a robust governance structure.
A good way to start would be to bring together a group of key pilot sponsors, under the chairmanship of participating Heads of State along with C-Suite representation from public and private sector stakeholders).
Conclusion
Let me conclude.
More than anywhere else in the world, FinTech can demonstrate its true purpose and potential in Africa, by focusing on financial inclusion. There is great scope for collaboration between traditional financial institutions and private fintech companies to bridge financial and digital divides.
Platforms like the 3i Africa Summit create the opportunity to realise Africa’s FinTech potential. I wish you fruitful discussions - discussions that lead to meaningful improvements in the lives of the people of this continent.