Global Practice of Digital Currency ⑤What changes are mobile payment and digital currency bringing to Africa?

【Editor's Note】

  As a product of the innovation of the times, digital currency has made its debut.

Why is digital currency born?

What is the situation of countries that are the first to test the water in the field of digital currency?

What is the pattern of currency competition in the future?

  For global central banks, digital currency is also an innovative experiment of “crossing the river by feeling the stones”. The prospect is promising, but it is still full of uncertainty.

The Paper hereby launches the "Global Practice of Digital Currency" year-end report, presenting readers with the latest status of digital currency practices around the world.

  In Africa, mobile payment is no longer new, and the first central bank digital currency was born in October this year.

  On the one hand, the booming development of mobile payment in Africa is related to the low penetration rate of banks. On the other hand, it also benefits from the fact that mobile phones are the main channel for Africans to access the Internet.

Under the new crown epidemic, the development of mobile payment is even more rapid.

  In Kenya in East Africa, whether it is a prosperous big city or a remote small town, almost all shops, hospitals, and schools support the use of mobile payment tool M-pesa.

According to the British magazine Mobile Marketing, 44% of Kenyan residents increased their use of mobile payments during the epidemic.

  In West Africa, Nigeria officially launched the central bank digital currency eNaira (eNaira) on October 25 this year, becoming the world's second central bank digital currency that is fully open to the public and recognized by international organizations after the Bahamas.

The Governor of the Bank of Nigeria Godwin Emefiele revealed on November 26 that the digital naira application "eNaira APP" has been downloaded nearly 600,000 times since its launch in October.

  In the past few decades, there have been frequent wars in Africa, and political and economic development has lagged behind the world. Paul Collier, director of the Center for African Economic Studies at the University of Oxford, once called the people on this continent "the bottom 1 billion people." ".

Collier is the former Director of the Development Research Group of the World Bank, an advisor to the African Committee of the British Government, and one of the world's top experts on African economic issues.

  Why is Africa making rapid progress in the field of digital finance, and can digital finance become a major opportunity for Africa to catch up in the future?

  In an exclusive interview with The Paper, Collier said that in the past, the government in Africa as a whole was weak and it was easy to "leapfrog" to a high level.

For example, in East Africa, almost everyone has a smart phone, which is very convenient to connect to the Internet. All these financial services, payment systems, credit cards, etc. can be operated through a smart phone.

Africa almost has a perfect experimental environment.

(Editor's note: the "leapfrog model", also known as the "leapfrog model". This model studies why the transfer of technological leadership occurs between countries, and explains the phenomena of unconventional development of backward countries and the phenomenon of catching up with advanced countries. For example, the United Kingdom surpassed the Netherlands in the 18th century, and the United States and Germany surpassed the United Kingdom at the end of the 19th century.)

  In Collier's view, the main driving force of the global economy 30 years ago was a large amount of untapped labor, one of which was China and the other was Eastern Europe.

At that time, there were a large number of young laborers in rural China and Eastern Europe who could engage in low-productivity activities, and there was also a part in South Asia.

Nowadays, Africa not only has a real untapped labor force, but also a young labor force that is growing rapidly. They are also constantly learning and using new technologies.

The world economy will once again undergo a major turn.

What can the central bank's digital currency change?

  Nigeria’s electronic naira uses the same blockchain technology as Bitcoin or Ether, which is stored in a digital wallet and can be used to pay for transactions with almost no fees.

But unlike cryptocurrency, it is characterized by strict access control by the central bank. It is not a financial asset itself, but a digital form of national currency. Its value comes from the physical naira and is linked to the physical naira. .

  Why does Nigeria introduce central bank digital currency?

  Nigeria is one of the main remittance destinations in sub-Saharan Africa.

According to IMF statistics, the total remittances received by Nigeria in 2019 amounted to 24 billion U.S. dollars.

Remittances are carried out through international remittance operators, and the fee is 1% to 5% of the transaction value.

The Central Bank of Nigeria expects that the electronic naira will reduce the cost of remittance transfer. It can transfer funds to Nigerian beneficiaries through wallet-to-wallet free transfer, making it easier for the diaspora to send money to Nigeria.

  On the other hand, Nigeria has a huge informal economy, which accounts for more than half of the country’s GDP and 80% of employment.

The electronic naira is account-based, and can be fully traceable in principle, bringing greater transparency to payments in the informal economy and strengthening the tax base.

  According to the Bank of Nigeria, the main advantage of the electronic naira is to increase financial inclusion.

Currently, the e-Naira wallet is only available to people with bank accounts, but it is expected that its coverage will eventually be extended to anyone with a mobile phone, including users without a bank account.

According to World Bank statistics, 38 million people in Nigeria do not have a bank account, accounting for 36% of the adult population.

Therefore, allowing those with mobile phones to use electronic nairas will increase financial inclusion and promote more direct and effective transfer payments. It is expected that 90% of Nigeria’s population will eventually use electronic nairas.

  In order to prevent risks, the holding limit in the wallet cannot exceed 5 million naira (approximately US$12,200); over time, the coverage will expand to groups with mobile phones and registered SIM cards (the latter type of holders will Subject to stricter transaction and balance restrictions).

  What's interesting is that in addition to Nigeria, Ghana in West Africa has also made it clear that it will launch a central bank digital currency and launched a pilot program in August this year; South Africa and Namibia in Southwestern South Africa are also studying the feasibility of issuing a central bank digital currency.

Behind this is the remarkable progress made by African technology companies in the payment field in recent years: In November 2019, Visa invested US$200 million in Nigerian payment company Interswitch.

Almost in the same period, OPay, a mobile payment service provider based in Lagos, a Norwegian company, raised US$120 million. Investors included well-known institutions such as Sequoia Capital and SoftBank Asia Ventures.

  On the other hand, the deep-rooted corruption and poverty problems in this region are still difficult to eradicate.

  Nigeria’s economic development is highly dependent on natural energy exports such as oil and natural gas.

Since the negative economic growth caused by the collapse of international crude oil prices in 2016, Nigeria’s economic growth has been unable to keep up with the rate of population expansion, and per capita income has fallen instead of rising.

Affected by the new crown epidemic, Nigeria's economy has been hit hard again, and GDP will again experience negative growth (-1.794%) in 2020.

In March of this year, Nigeria’s food inflation rate reached 22.95% (currently about 21%), a 15-year high.

  In the absence of government credibility, the "electronic naira" may still have a long way to go to gain the trust of the people.

  Collier pointed out that unlike East Africa, everything from West Africa to South Africa suffers from corruption.

In countries like Nigeria and South Africa, corruption is a systematic theft of the country.

This kind of plundering of the country reflects the serious dysfunction of the government.

Because Nigeria has a lot of natural resources, the political goal has become to seize the oil pockets.

The world in East Africa is different. East African countries do not have oil, and the situation is much better.

In Kenya, there has been a wealthy business community for a long time, mainly Asians, and these communities have no political overtones.

So Kenya has developed a business model, and politicians will give back to these business communities.

The Birth of Africa's Silicon Valley

  Tanzania, off the coast of East Africa, has also shown interest in adopting digital currencies.

  Soon after taking office, Tanzanian President Samia Sulhu Hassan asked the country’s central bank to prepare for the issuance of digital currencies.

In November, the Central Bank of Tanzania stated that it has begun preparing digital currencies to ensure that the central bank's digital currencies will not lag behind other countries.

  Prior to this, digital payments had been quite popular in East Africa.

  M-Pesa means "mobile currency" in Swahili. It is a mobile payment system officially launched by Kenyan telecom operator Safali Communications in 2007. It has now been developed to provide deposits and withdrawals, transfers, payments, credit, A comprehensive platform for wealth management and other financial services.

What's interesting is that unlike domestic Alipay and WeChat Pay, M-pesa does not rely on smart phone applications, but uses the built-in application menu of the SIM card to realize function selection, so offline payment can be realized.

  Motorized taxis ("Boda Boda") in Kampala, the capital of Uganda, are everywhere.

In 2015, SafeBoda was launched on the basis of Boda Boda, focusing more on the safety of drivers and passengers.

In 2017, SafeBoda launched its digital wallet, which provides an integrated payment system for app users and drivers through a mobile service provider.

Since passengers pay via mobile phones, drivers can record their income without a bank account, which effectively expands the scope of financial services available to drivers and passengers.

  After the outbreak, SafeBoda quickly found local restaurants, food suppliers and markets, and opened partnerships with them. It also cooperated with the United Nations Capital Development Fund and digital experts to launch a new digital service called Shop within two weeks.

  Today, according to statistics from the International Monetary Fund (IMF), the SafeBoda application has been downloaded more than 1 million times. Through Kampala’s 20,000 motorcycle drivers, customers can connect to nearly 1,000 food suppliers, 350 stores, 16 markets and 21 United Nations Population Fund (UNFPA) pharmacies.

By providing cashless services, SafeBoda not only helps revitalize the local economy, but also reduces the risk of local spread of the epidemic.

  The Governor of the Bank of Kenya, Patrick Njoroge, said that the East African Community has always been at the forefront of digital finance.

“Since 2007, digital finance has changed our lives and consumption habits. During the epidemic, members of the East African Community, including Kenya, Rwanda, Uganda, and Tanzania, have been encouraging the use of mobile wallets to respond to the health and health issues brought about by the epidemic. Economic challenges."

  What makes mobile payments in East Africa flourish?

  Collier believes that Africa has great potential but no financial capital.

And in fact, financial capital is flowing out of Africa.

However, in terms of organizational capital, East Africa is very advanced.

Rwanda, Uganda and Kenya are very business-friendly and can indeed help businesses.

They work very hard because they know that they have no natural resources and they also need to be a refuge for the poor in that area.

Kenya has many good science and technology companies, they are doing very well, and there are also a large number of young people willing to use new technologies.

In a place where there are many young people who know how to use smartphones, it is much easier to set up a payment system.

When Google went to Kenya 10 years ago, they weren't teaching Kenyans what they wanted to learn. In Kenya, Google was learning.

They are students and Kenya is the teacher.

  In Konza, 60 kilometers away from the Kenyan capital of Nairobi, the Kenyan government is investing in building a science and technology city, covering an area of ​​more than 30,000 acres, known as the "Silicon Valley of Africa"-attracting internationally renowned high-tech companies to settle down, cultivating local companies, and promoting information technology And the development of the service outsourcing industry is expected to provide the country with more than 200,000 jobs after its completion in 2030.

  The young generation who are keen on science and technology in Africa will be willing to adopt technological methods to solve urban development problems.

At present, only 40% of the population in sub-Saharan Africa live in cities, and the degree of urbanization is low.

  Collier is the chairman of the advisory committee of Kigali, the capital of Rwanda. He introduced that Kigali has been built into a clean and well-functioning city, with a good judicial environment and a safe business environment.

This was done to prevent another mess in Kigali (Rwandan civil war and genocide in 1994).

Now that the workforce here has learned how to use new technologies, the city must be electronic in all aspects.

Rwanda's business model works very well and is very safe.

  Kigali spent decades reborn from the 1994 genocide, and now it has grown into a technology hub, with multiple technology company incubators, an engineering school at Carnegie Mellon University, and some start-up companies here. Set up, its products include drones and cashless payment systems.

In the World Bank's ranking of business environment, Rwanda ranks 38th in the world in terms of ease of doing business, ranking first among African countries, and surpassing the Netherlands (42), India (63) and Brazil (124).

"Africa will define the future"?

  Constrained by legacy issues such as poverty, the slave trade, and colonialism, Africa has long been excluded from the upsurge of globalization.

But now, Jack Dorsey, one of the founders and former CEO of Twitter, bluntly said on Twitter: "Africa will define the future."

  Collier believes that the development momentum of mobile payment and digital finance will spread throughout Africa and enable the new economy to flourish on this continent.

According to Collier, in the past, Africa did not establish a land line network. Now, according to local conditions, various places use solar energy and wind power to achieve more commercialization.

Because smartphones have made the entire network more commercialized, many of these new technologies can be interactive, and finance will soon be able to develop-through smartphones, companies and individuals can rent electricity, such as renting a certain solar battery. A certain period of time of the board, etc.

Then, relevant enterprises will provide services for these panels and battery tubes through logistics, and there will be large-scale logistics operations.

Combining all these means of drones, electricity, and finance through new technologies, we will jointly build a large network.

  The epidemic has intensified this wave of digitalization.

  Collier said that the epidemic is a huge mass education, and it has also given birth to many people to learn new technologies and technologies.

Surprising changes have taken place in the past 12 months alone, and this has not only accelerated the development of financial technology, but also increased the interconnectivity between technologies.

Africa did lack business organization and capital in the past, and new technologies provide opportunities.

China's assistance to Africa helps to take full advantage of these huge opportunities.

As long as some African countries take the lead, the same story will happen in other regions. For example, Ghana in West Africa is now learning from Rwanda in East Africa.

Just like the trend brought about by China's reform and opening up spread to South Asia and the entire East Asia.

  The Paper Journalist Jiang Mengying

  (Intern Wang Jinghan also contributed to this article)