AfCFTA Agreement on Financial Services

EFSA/EFA have drafted a submission on the draft AfCFTA Agreement on Financial Services. This instrument will expand upon the Digital Trade Protocol (see above) and sets down a path for the Member Parties on the AfCFTA. Our submission recognises that the financial sector is extremely complex, particularly due to the rules applied by the national central banks and regulators. We suggest that the following issues are addressed in more detail: – The need to promote financial innovation and to access new emerging technologies in the fields of finance and cross-border data flows; the means to promote financial inclusion across the continent by tackling non-tariff barriers and improving digital skills and access to the internet. The creation of clear policies on financial data aimed at ensuring secure data portability for consumers and businesses. Ensuring interoperability between both the regulatory frameworks and the mechanisms of cross-border payments to facilitate seamless end-to-end digital solutions. Reference mobility of experts to assist with the introduction of the technologies and regulations. The creation of standards and codes of good practice to support general regulatory policies. Open banking needs to be explored further as means to enable the free flow of money between banks in different countries, through the use of open API’s via licensed third parties. The regulation of costs by market incumbents to ensure an open market by licensed third parties and prevent inaccessibility by consumers/users due to high costs.

Recently the importance of cross-border financial services was highlighted during the Africa Prosperity Dialogues in Ghana when panellists called on governments and regulators to accelerate efforts to build robust inter-country payments systems to support intra-continental trade. The conference stressed that, despite the success of mobile money on the continent, cross-border payments still add unnecessary costs and delays to businesses and individuals. McKinsey has estimated that Africa’s e-payments industry generated approximately $24bn in revenues in 2020, even though it accounted for a mere fraction of all payments. Cross border payments, however, continue to be hampered by legacy challenges, including inadequate payment infrastructure, inconsistent regulation, limited policy coordination and user education, and security and fraud concerns. All issues EFA has raised in our paper on the AfCFTA Agreement

AfCFTA is also working on elements of financial services, for example, one critical hindrance to financial inclusion and digital trade is the lack of interoperability of digital payment systems, particularly for micro and small traders who dominate Africa’s economy. In partnership with the AUC, Smart Africa, and the Better Than Cash Alliance, the AfCFTA has issued a call to action on Digital Financial Inclusion for the Success of the One African Market. The call to action focuses on 5 key pillars that will be instrumental in Africa’s governments readiness to build inclusive digital economies for the One Africa Market: Government leadership, supportive regulations, fostering universal trusted usage, promoting regional collaboration, and championing financial equality.

Finally, a new fintech application, Bingtellar, enables swift and cost-effective cross-border transactions into or across Africa for diaspora, freelancers, remote teams, international contractors, and businesses. At the heart of Bingtellar’s solution is the integration of stablecoins and DeFi to local payment networks, such as mobile money wallets and bank accounts, supported by efficient on/off ramps and institutional market makers. While platforms like PayPal, Western Union, and Wise have made attempts to address these challenges globally, these are not tailored to serve effectively African users.