In a significant leap to open up financial services to the public in 8 West African nations, approximately 90 banks and financial institutions have adopted a groundbreaking instant payment system in the West African Economic and Monetary Union (WAEMU).
Launched in early August 2024, this initiative aims to provide round-the-clock payment processing across the 8 WAEMU countries:
- Burkina Faso
- Benin
- Côte d’Ivoire
- Guinea-Bissau
- Mali
- Niger
- Senegal
- Togo
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The IPS is set to enhance financial inclusion by enabling payments at any merchant using interoperable QR codes and by standardizing financial services for businesses. Currently, the WAEMU region has around 21 million bank accounts for a population of approximately 142 million. The new system aims to address the financial inclusion gap, with only 24.3% of adults in the region holding bank accounts as of 2022.
The IPS is expected to play a pivotal role in expanding financial access, particularly in underserved areas, and to foster greater economic participation and stability within the WAEMU region.
In 2022, only 24.3% of adults in the region had bank accounts:
- Benin is the undisputed leader in terms of bank penetration, with an estimated 35.7%, followed by
- Côte d’Ivoire and Togo (both close to 30%)
- Mali (24%)
- Senegal (22.5%), and
- Niger at around 8.7%
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The system’s interoperability covers the entire WAEMU zone, enabling smooth cross-border transactions between the eight member countries. Residents of the region can make instant and secure payments, whether for personal or commercial transactions, free from the restrictions of national borders.
The Central Bank of West African States (BCEAO) has initiated a pilot phase for the interoperable instant payment system (IPS). The first phase involved 25 financial institutions, including major players like:
- Ecobank
- MTN
- Mansa Bank, and
- Orabank
This testing phase allows for system adjustments and evaluations of effectiveness. A second cohort of 65 institutions, including nine electronic money institutions (EMIs) and 14 decentralized financial systems, joined the pilot on August 12 2024. Notable additions include:
- Coris Bank
- Cofina
- Baobab
- Moov
- United Bank for Africa, and
- Orange Finances Mobile
The IPS stands out for its interoperability, allowing seamless transactions between different types of accounts, whether from:
- Traditional banks
- EMIs, or
- Fintech companies
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According to Modou Sall, a digital banking and fintech strategy consultant and Vice President of operations at fintech KaliSpot, the system ensures broad and diversified participation by licensing all financial entities, including microfinance institutions and e-money issuers.
“Interoperability is at the heart of the IPS, enabling a fluid connection between the accounts of customers from different institutions – commercial banks, EMEs or fintechs,” says Sall.
“This total interoperability facilitates transactions between the various players in the financial system. Access to the IPS is universal for all players holding a licence issued by BCEAO.
This openness allows for broad and diversified participation within the system.”
Key benefits of the IPS include real-time processing of payments, which ensures immediate availability of funds upon transaction completion. This system enhances transaction fluidity, crucial for economic and financial activities.
The IPS facilitates transactions across various account operators, enabling customers to send and receive money instantly, irrespective of their financial service provider. This interoperability simplifies transactions for merchants and customers by overcoming compatibility issues between different payment systems.
The IPS also extends cross-border capabilities, allowing for smooth transactions between WAEMU member countries. This feature supports secure and instant payments for both personal and commercial purposes across national borders.
The new payment infrastructure operates 24/7 and supports transactions of any type, aiming to simplify everyday transactions and encourage financial innovation. Transaction costs are significantly reduced or even eliminated, benefiting low-income populations and promoting broader financial inclusion.
For small businesses and entrepreneurs, the IPS offers faster access to funds and financial services, enhancing their ability to manage operations efficiently and capitalize on market opportunities. This support is expected to boost local economic growth and entrepreneurship.
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