Interoperability of digital payment systems: Lessons from the East African Community
In this paper – the second of two – Ennatu Domingo, Stephanie Arnold and Philomena Apiko look at the opportunities and challenges of implementing interoperable, instant and inclusive digital payment systems, one of the key pillars to enable e-commerce and cross-border trade in Africa.
This policy paper – the second of two – looks at the opportunities and challenges of implementing interoperable, instant and inclusive digital payment systems, which are essential for e-commerce and cross-border trade in Africa. Digital economic integration is critical for the financial inclusion of millions of small traders – of whom 70% are women – as well as vulnerable communities in border regions.
The paper focuses on the East African Community (EAC) – one of the most economically integrated regions in Africa – and its efforts to promote digital economic integration in three member states, namely Tanzania, Kenya and Uganda. Finally, it provides policy recommendations for the European Union on how to strengthen its support to the EAC and its member states in implementing cross-border interoperable digital payment systems.
The analysis suggests the need for a solid regulatory framework at national, regional and continental levels to increase the volume of cross-border trade under the African Continental Free Trade Area (AfCFTA) on top of the interoperability of digital payment systems. Regional Economic Communities (RECs) are leading the harmonisation of standards and regulations for interoperable payment systems at the regional level. Yet, as the case of the EAC shows, without the political buy-in of member states and key players within those states, their efforts at implementing these systems remain limited. In this context, it will be important to increase the cooperation between national governments, RECs, the private sector and international partners.