SWIFT white
paper
Africa Payments: Insights into African
transaction flows
Executive summary
This report uses SWIFT’s unique data to map trade flows against
financial flows for the first time, revealing a new perspective on
Africa’s transaction flows. Underscoring the importance of trade
corridors between Africa and Asia Pacific and the higher than
expected intra-Africa volumes, it also identifies potential drivers
for change and the impact thereof on banks doing business in
Africa and with Africa.
The SWIFT report suggests an evolution towards fewer but larger
pan-African banks – rather than a revolution in the transaction
banking landscape in Africa – and a gradual pressure to adapt to
new dynamics in the currency environment.
Commercial banks, regulators and other actors in the African
financial industry must watch carefully the evolution of transaction
flows in order to anticipate market shifts.
Current financial flows do not reflect the
magnitude of commercial flows between
African countries and Asia Pacific
• While 22% of the commercial payments from Africa will end up
in Asia Pacific, only 5% of the financial flows go directly to
that region.
• Banks in North America receive almost 40% of the payments sent
by Africa, versus only 9% of the commercial flows.
• A total of 48% of intra-African import/export settlement involves
intermediation by a bank outside of Africa.
The US dollar prevails as the dominant trade currency and the EUR
is rarely used for transactions with clients that are not based in the
Eurozone.
•
Almost 50% of commercial payments sent from Africa are
denominated in USD.
• At the same time, more than 80% of the dollar transactions sent
from Africa to the US have their financial beneficiary in another
region.
• Only 15% of euro payments from Africa are eventually transferred
outside of the Eurozone.
The relative importance of US dollar clearing
banks has increased in the past 10 years
The market share of USD clearing banks has grown rather than
diminished in the past decade – rising from just under 25% to almost
40% – even while trade with Asia has increased at the expense of
trade with the US. Part of this may be attributed to flows with Asia
that are denominated in USD and are intermediated by banks in the
United States.
However, several environmental factors may drive change in crossborder transaction flows. This could lead to a reshaping of pan-African
banking, shifts in currency usage and the opportunity for multi-currency
regional clearing in Africa.
Political will to regionalise, raise FDI attractiON
and foster more intra-Africa trade
Boosting intra-African trade still further is important, as it has huge
potential to create employment, be a catalyst for investment and to boost
growth in Africa. As a result, political backing for regional integration
projects that support these aims is likely to impact transaction flows.
The demand side of the African market is
expanding and evolving
Corporates are the primary driver of cross-border transactions.
As they expand across and out of Africa, their needs will evolve.
This will lead to demand for new products and services, and deeper
relationships with banks in key markets.
International regulatory pressures also
impact cross-border transactions
New regulations and compliance requirements (for example, know
your customer and anti-money laundering processes) are making it
increasingly expensive for banks in the United States and Europe to do
business with small and unknown counterparties.
SWIFT data shows that American and European banks have already
shrunk their African banking network. This opens the way for larger
African transaction banks to position themselves as a gateway to other
markets in Africa.
Financial market infrastructures modernising
African countries are investing in financial markets infrastructures
(FMIs), many at a regional level. Policy makers recognise that payment
systems and other infrastructures play a huge role in fostering and
deepening economic development.
Along with harmonised legal and regulatory frameworks, robust
regional FMIs will make intra-region payments more competitive and
reduce the need for foreign financial intermediation. ■
Edition 7
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BANKER SA
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2013/10/15 11:11 AM