Security and Trust in Africa’s Digital Financial Inclusion Landscape

To promote financial inclusion, innovators and policymakers across Africa have encouraged the adoption of financial technologies like mobile banking and mobile money, as well as more emergent technologies such as artificial intelligence and distributed ledgers. This is especially the case in sub-Sah...

Full description

Saved in:
Bibliographic Details
Published in:Policy File 2024
Main Authors: Aubra Anthony, Sambuli, Nanjira, Sharma, Lakshmee
Format: Report
Language:English
Subjects:
Bank technology
Digital technology
Finance
Financial inclusion
Financial services
Online Access:Request full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:To promote financial inclusion, innovators and policymakers across Africa have encouraged the adoption of financial technologies like mobile banking and mobile money, as well as more emergent technologies such as artificial intelligence and distributed ledgers. This is especially the case in sub-Saharan Africa, where there are an estimated 400 million financially unserved or underserved people. Digital finance is characterized as a catalyst for poverty reduction, as it provides low-income households with access to affordable and convenient tools to support their economic activities. Kenya’s M-PESA mobile money system, for example, is famously purported to have lifted households out of poverty. Such tools can facilitate digital payments from governments or businesses to people and vice versa—providing quicker transmission of pensions or welfare, for instance. And these payments are generally considered more efficient and less vulnerable to fraud or theft than cash payments and can help consumers establish a financial history that enables access to loans and other financial services. Digital financial inclusion is thus a priority across Africa, as evidenced by the uptake of digital technologies in most African markets. According to the Global Findex Database, Africa leads the world in mobile money adoption, the primary driver of digital financial inclusion.3 Additionally, mobile money accounts have enabled users to save formally, borrow money, make or receive digital payments, receive remittances, and even raise emergency funds. The potential of digital financial services has spurred innovations in the sector of financial technology (fintech), thus creating options for businesses looking to reach new markets or more effectively serve their customers. Between 2020 and 2021, over 2,000 of the estimated 5,200 tech start-ups in Africa were in the fintech sector,4 a testament to the push to deepen financial sector services and to the indispensable role of digital technologies in driving financial inclusion. Digital financial services (DFS), however, are not without significant challenges. Consumers less familiar with digital technology, or who have limited literacy, can find DFS difficult to navigate. And consumers in rural or poorly connected regions often have inequitable access to mobile phones and the mobile internet. Access rates for Africa’s total population remain stubbornly low. In 2023, among the continent’s 1.18 billion people, the mobile phone penetrat