Navigating the future of contactless payments in Africa

By Raji Ahmed

The global payment landscape has evolved dramatically from cash transactions and electronic transfers to the convenience of swiping or tapping smartphones, wearable devices, or payment cards at point-of-sale (POS) terminals equipped with near-field communication (NFC) technology.

Since its introduction to Africa in 2010, contactless payments have catalyzed significant transformations in the continent’s fintech sector and banking policies, paving the way for faster and more convenient financial transactions.

By 2022, Africa’s fintech sector experienced a remarkable 17% year-over-year growth, driven largely by the expansion of digital payment systems. Contactless payments, adopted at an annual growth rate of 18% over the past five years, have been instrumental in this progress, with NFC technology enabling seamless transactions. However, cybersecurity expert Ashraf Abbas has highlighted pressing challenges alongside these advancements.

“The wireless nature of contactless transactions exposes users to risks such as data interception and skimming,” he explained. Hackers can exploit the communication between devices and POS terminals to access sensitive information, leading to card cloning and fraudulent transactions.

Abbas also pointed to the absence of robust two-factor authentication in many systems, noting that reliance on single-factor authentication, such as a simple tap, increases the likelihood of unauthorized access.

Abbas also underscored the critical role of regulatory frameworks in addressing these vulnerabilities, citing the Central Bank of Nigeria (CBN) as a pivotal force in shaping security standards.

He emphasized the importance of adhering to CBN guidelines to ensure the secure deployment of payment systems, though he acknowledged the challenges fintech companies face in adapting to dynamic regulatory requirements. Infrastructural vulnerabilities such as weak network security and insecure POS terminals remain significant concerns.

Major players, including traditional banks, fintech startups, and global payment giants like Visa and Mastercard, have introduced NFC-enabled cards and mobile wallets, making digital transactions more accessible.

The CBN has championed this shift through initiatives like the cashless policy, which incentivizes the use of electronic payment systems. This rapid adoption has enhanced convenience for users, reduced reliance on cash, and fostered innovation in the payment ecosystem.

For the government and the economy, contactless payments present significant advantages. By digitizing transactions, the government can better track economic activity, improve tax collection, and reduce the cost of printing and managing cash.

The move towards a cashless society helps combat money laundering and other financial crimes. For users, the technology offers unparalleled ease, speed, and security when properly implemented.

Ensuring inclusivity still remains a huge challenge, as a significant portion of the population still lacks access to the internet or smartphones. Overcoming these barriers could unlock even greater economic benefits, positioning Nigeria as a leader in digital payments across Africa.

Abbas emphasized the importance of consumer awareness and education. He advocated for initiatives to tackle phishing and promote secure device usage, including software updates and biometric authentication.

“Educating users can significantly reduce risks,” he noted, calling for a collaborative effort among regulatory authorities, fintech companies, and consumers.

Contactless payments have undeniably revolutionized Africa’s fintech sector, offering unmatched convenience and driving substantial growth.

Yet, as Abbas pointed out, addressing security challenges through stronger infrastructure, regulatory compliance, and consumer education is critical. With collective action, Africa can fully harness the potential of contactless payments to foster financial inclusion and economic prosperity.