SWIFT Paper Identifies Drivers for Change in African Banking
A white paper issued by financial messaging provider SWIFT, entitled ‘
Africa Payments: Insights into African transaction flows’
, offers insights into transaction flows between African countries and between Africa and other regions, based on analysis of SWIFT traffic.
The paper identifies environmental factors that may drive change in cross-border transaction flows, which could reshape pan-African banking, lead to shifts in currency usage and create opportunities for multi-currency clearing in Africa.
The data suggests that financial flows do not reflect commercial flows, demonstrating a disconnect between payment routes and the movement of goods and services, particularly between Africa and Asia. So while Asia Pacific countries are the fastest growing trading partners for most African countries, representing 22% of all commercial flows from Africa, only 5% of financial flows are sent directly to banks in the Asia Pacific region.
Conversely, while banks in North America receive almost 40% of the payments sent by Africa, only 9% of the commercial flows are destined for the North American region. In total, more than 80% of the transactions from Africa to the US have their financial beneficiary in another region.
SWIFT comments that many factors that could influence the direction of payment flows. For example, in the West and Central African economic regions, where they share common currencies and common clearing and settlement infrastructures for payments, only 2% of trade settlement involves a financial intermediary outside of Africa , against compared 48% of intra-Africa trade settlement overall.
“Existing projects in Western and Central Africa demonstrate the potentially disruptive power of regional harmonization, and there is significant political will for similar initiatives on the African continent,” said Christian Sarafidis, head of Western Europe, Middle East and Africa (WEMEA), SWIFT.
“ Other factors could also play a powerful role in driving change in Africa, such as an evolving corporate sector, regulatory pressure in developed markets and new financial market infrastructure.”