Africa Payments Report

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Africa Payments: Insights into African transaction flows?

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Africa Payments Report

  1. 1. Report highlights Africa Payments: Insights into African transaction flows? September 2013
  2. 2. African cross-border payments context The sustained growth of the African economies is well reflected in SWIFT cross-border payments volumes and selected regional integration initiatives also show signs of growing importance. USD and EUR remain predominant base currencies for settling cross- border trade but increasing and renewed pressure from political and economical drivers are challenging that status-quo. What does this mean for banking in Africa? This paper will attempt to frame the cross-border banking context in the midst of regionalisation initiatives, international regulatory pressures, and the reconfiguration of the trading corridors. Supported by some unique market data on payment routes, we are exploring what are the possible evolution scenarios that will impact banking in Africa. September 2013 2
  3. 3. 0.0 1000.0 2000.0 3000.0 4000.0 5000.0 - 500.00 1,000.00 1,500.00 2,000.00 2,500.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP Africa payments on SWIFT Africa is growing September 2013 3 Africa GDP has shown a positive growth each year with a fast recovery post 2009 financial crisis Key highlights • Economic and demographic indicators indicate a promising future for Africa • The banking sector will benefit from this growth and will need to adapt to a changing environment • SWIFT statistics about commercial payments are strongly correlated with the GDP evolution as SWIFT carries most cross-border financial transactions About SWIFT • SWIFT is widely recognised as the trusted financial telecommunication service provider for the payments clearing market and provides messaging services for over 90 domestic and international payments clearing systems worldwide and covering 2,000+ banks in 90+ countries • SWIFT presence in the African region is also growing rapidly as shown with an increasing number of payment systems using SWIFT SWIFT forecasts 6% GDP growth in 2013 based on the evolution of SWIFT payments volumes Source: GDP (IMF), Africa payments (MT103, SWIFT)
  4. 4. Overview of current transaction flows September 2013 4 Where are commercial payments from Africa going to? Which payment routes are being used? Key highlights • The importance of intra-Africa commercial flows, and between Africa and Asia Pacific is not reflected in the transaction routes • The dominance of USD as currency for international trade places banks in the United States in a unique position to intermediate flows with clearing services USD 49% EUR 27% ZAR 7% GBP 6% Others 11% Currency distribution for outgoing commercial payments from Africa Source: SWIFT (number of cross-border MT103 sent from Africa to end-beneficiary country/region, April 2013) Source: SWIFT (number of cross-border MT103 sent from Africa to counterparty country/region, April 2013) Source: SWIFT (number of cross-border MT103 sent from Africa in 2012) 23% 22% 1% 26% 15% 4% 9% Africa Asia-Pacific Central & Latin America Europe - Euro Zone Europe - Non Euro Zone Middle East North America 14% 5% 0% 28% 13% 1% 39% Africa Asia-Pacific Central & Latin America Europe - Euro Zone Europe - Non Euro Zone Middle East North America
  5. 5. Africa is regionalizing September 2013 5 Evolution of outgoing commercial payments from African regional initiatives Key highlights • The continent sees several regional initiatives aiming at easing business between neighbouring countries • Some of these involve a high degree of integration with a common currency (ECOWAS-WAEMU/UEMOA and ECCAS-EMCCA/CEMAC) whereas others remain rather inactive (Maghreb) • The SADC region dominates. However, other regional unions show a significant growth such as ECOWAS – WAMZ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Others SADC ECOWAS - WAMZ ECOWAS - WAEMU/UEMOA ECCAS – EMCCA/CEMAC EAC Arab Maghreb Union Source: SWIFT (number of cross-border MT103 sent from African regions)
  6. 6. Radioscopy of African regional initiatives 6 Arab Maghreb Union EAC ECCAS – EMCCA/CEMAC ECOWAS - WAEMU/UEMOA ECOWAS - WAMZ SADC COMESA 0% 20% 40% 60% 80% 100% Africa Asia-Pacific Central & Latin America Europe - Euro Zone Europe - Non Euro Zone Middle East North America 18% 75% 0% 7% 69% 9% 4% 18% 12% 70% 0% 18% 10% 32% 0% 58% 80% 8% 0% 12% 53% 19% 14% 14% 57% 17% 13% 13% Where are commercial payments going to? In which currency? African region Source: SWIFT (number of cross-border MT103 sent from Africa to end-beneficiary country/region in April 2013) Source: SWIFT (number of cross-border MT103 sent from Africa in 2012) USD EUR ZAR … September 2013
  7. 7. Key forces driving change September 2013 7 African Banking Rebalancing? Financial Market Infrastructures FMIs interlinking and modernising FMIs extending their geographical reach FMIs increasing the accessibility and attractiveness of local financial instruments Regulators & Risk Management More prudential controls globally Regulation driving-up transaction costs Global banks reviewing compliance risk exposure Demand Side Growing economic activity Proximity with trading partners Competitive pressure Political Will More Regional Integration Attracting more FDI Investments in Infrastructure Shift in Currency Usage? Opportunity for Regional Clearing?
  8. 8. Conclusion Banking in Africa • Leverage domestic and regional foot-print to gain pan-African reach • Raise the bar on the license to operate internationally • Build efficient solutions to corporate clients following the evolution of their needs • Will this require new banking partnerships? Banking with Africa • Banks from mature markets may want to review their footprint in Africa • Means that compliance becomes a joint effort • Banks from emerging markets may find it worthwhile collaborating with African players on new offers • On both sides there are drivers for revisiting relationships 8 Number of counterpartie s in Africa, - 5%-6% -5% -4% -3% -2% -1% 0% 201201 201204 201207 201210 201301 201304 Banks with HQ in Africa 80% Foreign banks in Africa 20% Payment volumes sent by bank profile in Africa Evolution of number of African counterparties for European and American banks Source: SWIFT (number of cross-border MT103 sent from Africa in 2012) Source: SWIFT (number of banks in Africa sending MT940 to counterparties in Eurozone or North America) September 2013
  9. 9. http://www.swift.com/about_swift/white_papers/index For a copy of the full report

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