Digitnomics 
About 70 per cent of an estimated 31 billion social safety payments made annually across Africa are still conducted in cash, highlighting a major gap in the continent’s digital financial inclusion drive, AfricaNenda has said.
Sabine Mensah, Deputy Chief Executive Officer, AfricaNenda, said the continued reliance on cash for social payments represents both a challenge and an opportunity for governments seeking to expand access to formal financial services.
She spoke during a media workshop on inclusive instant payment systems, where she outlined the role of digital payments in improving financial inclusion and access to financial services.
According to Mensah, governments are among the biggest payers in African economies, making government-to-person payments an important channel for bringing financially excluded populations into the digital financial ecosystem.
“About 31 billion social safety payments a year are done in Africa. Sadly, 70 per cent of those are still cash-based,” Mensah said.
She argued that moving more social payments to digital channels could provide beneficiaries with a reason to open and actively use formal financial accounts.
For many low-income and vulnerable people, she said, receiving a government benefit digitally could become their first sustained interaction with a formal financial service.
“Imagine if they digitise all of these payments,” she said, noting that social benefit recipients are among the most vulnerable groups in society.
From Cash Transfers To Financial Histories
Mensah said the benefits of digitalising government payments could extend beyond simply replacing physical cash.
When beneficiaries receive and spend money through digital accounts, they begin to create transaction histories that could potentially make it easier for financial institutions to understand their financial behaviour.
She said this could eventually improve access to services such as savings and credit.
“If you keep using it, your microfinance institution in your village will actually have some information and can say, ‘This person, we can provide credit based on the transaction history,’” she said.
The absence of such digital records, she explained, makes people whose financial lives are conducted almost entirely in cash difficult to assess within the formal financial system.
“When transactions are in cash, they are invisible to the financial ecosystem,” Mensah said.
This has wider implications for financial inclusion because a person may be economically active without having the transaction records that banks, fintechs and microfinance institutions can use when assessing financial needs and potential creditworthiness.
Government Payments As A Digital Finance Gateway
Mensah also identified agricultural subsidies and other government-to-person payments as potential entry points for digital financial services.
AfricaNenda’s research, she said, found that 13 per cent of people who opened accounts did so to receive government payments.
This suggests that government payment programmes can function as an important acquisition channel for formal financial services, particularly among populations that may otherwise have little incentive to open an account.
However, Mensah said digitisation should not stop at putting beneficiaries on a payment platform.
She called for financial education to accompany digital government payments so recipients understand how to use accounts, save, make transactions and potentially access other financial services.
The shift could also benefit governments by improving the efficiency of disbursements and reducing some of the leakages and operational costs associated with cash-based payment systems.
Digitising government collections, she added, could also create opportunities for improving public revenue collection.
Affordability Could Determine Adoption
While digitalising social payments could expand access, Mensah cautioned that affordability remains critical.
The warning is particularly relevant in markets such as Nigeria, where consumers have raised concerns about bank and transaction charges.
Mensah said pricing can determine whether people adopt digital payments and how frequently they use them.
Some countries have therefore adopted models in which central banks absorb or subsidise part of the cost of transactions, while other payment types generate fees that help support the broader payment infrastructure.
“The question is, who pays for it? Because this transaction and the infrastructure has a cost,” she said.
According to her, putting the entire cost of payment infrastructure on banks, fintechs and other payment service providers could discourage participation.
The challenge for regulators, she said, is to find a pricing model that keeps digital payments affordable for consumers while ensuring that the infrastructure remains commercially sustainable.
“If you put the cost on the participants, it’s a disincentive for them,” she said.
Beyond Mandates
Mensah also cautioned against assuming that government mandates alone would guarantee the adoption of digital payment systems.
While mandates have worked in some markets, she said regulators need to engage banks, fintechs, mobile money operators and other participants when designing payment infrastructure and pricing models.
“It really has to be an ecosystem engagement to find the win-win business case,” she said.
This is important because the last-mile delivery of digital payments ultimately depends on financial service providers that connect consumers to payment infrastructure.
For Africa, the challenge is therefore no longer simply about building digital payment rails.
It is about ensuring that the rails are affordable, accessible and useful enough to move people and government programmes away from cash.
With 70 per cent of the continent’s estimated 31 billion annual social payments still conducted in cash, the scale of that transition remains significant.
