Facilitating inter-regional payment flows
By Tim Masela, Head of the Payments Department, South African Reserve Bank
In June 2018, SWIFT published a white paper on Africa’s transaction flows. Using SWIFT data, we’ve mapped trade flows against financial flows, revealing a unique perspective on Africa’s transaction patterns. We look at how transaction banking has changed in Africa over the last five years and identify potential drivers for change and their impact on banks doing business in Africa.
We also spoke to industry leaders in Africa to hear their thoughts on the future of banking on the continent. Here, Tim Masela, Head of the Payments Department at the South African Reserve Bank, talks about how to facilitate inter-regional payments flows.
Payment infrastructures can contribute significantly to enabling economic activity in Africa. Although intra-regional trade within some African regions may be low, implementation of practical, safe and efficient payment infrastructures will go a long way towards making it easier to do business in Africa by removing some of the friction.
Various African regional initiative groups have been hard at work developing payment infrastructures as part of their integration agendas. Progress has been achieved in these programmes and some visible changes in the profile of payment flows are evident. However, questions are often raised relating to the need to open up some of these infrastructures to payments from other African countries. The core question here is whether the different regional groups will be open to facilitating inter-regional payment flows in addition to intra-regional.
This is a valid question that should be answered sooner rather than later. This will ensure that openness and the adoption of standards that will facilitate integration are key considerations in the development of these infrastructures. To achieve this, it will be necessary to establish platforms for dialogue and develop appropriate frameworks.
As payments take place in a network economy, collaboration among a multiplicity of stakeholders is imperative. Central banks, as regulators and overseers of payment systems and facilitators of their development, are well placed to take the lead and induce change. This will drive engagement and ensure that desired outcomes are achieved. Established collaboration structures within the continent should be leveraged to initiate dialogue and engagement between public and private sector stakeholders.
The initial outcomes of the engagement process may be practical frameworks that lay the foundations to enable the integration of existing or future infrastructures. These could be followed by more tangible roadmaps that set out the path to achieving inter-regional integration. As part of the process, short, medium and long term strategies supported by practical monitoring mechanisms will need to be put in place.
The drivers for easier inter-regional payment flows include:
- Increased payment efficiency in terms of speed and cost
- Increasing the ease of doing business
- Greater access to payment services
- More transparency in the payment value chain process
- Addressing the de-risking aspects as far as they relate to payments in Africa
For wholesale payments, banks are the best partners for developing the right approach and frameworks that will ensure successful delivery. It is, however, crucial that the process involves a public-private partnership between the regulators/overseers and the bank stakeholders to ensure that all appropriate building blocks are part of the end solution.
For retail payments, the central banks should take the lead and engage with the private sector on key public policy objectives such as financial inclusion, competition and consumer protection. They should also establish an environment that enables the private sector to work on possible solutions while continuing to monitor progress. It is also worth noting that private sector stakeholders should come from a range of sectors beyond the banking sector.
By working together, all participants can ensure that these infrastructures are built with the considerations of standardisation and interoperability as integral components, ensuring that they will be able to achieve their goals.