DPI: A New Frontier For Africa’s Financial Ecosystem

Africa stands at the cusp of a financial revolution. As the continent seeks innovative solutions to foster economic stability, boost inclusion, and improve governance, Digital Public Infrastructure (DPI)—whose building blocks are digital identity (digitally verifying identities), payment systems (securely transferring money), and data exchange (safely exchanging personal information)—emerges as a key enabler of inclusive transformation.

By adopting instant payment systems, promoting interoperability, and embracing data-driven policymaking, African nations can unlock immense economic value and position themselves as global leaders in digital innovation. But strategic investment is needed before the continent can reap the benefits of DPI.

“Digital Public Infrastructure isn’t just a tool; it’s the backbone of a future-ready economy,” says Robert Karanja, Senior Director, Africa, Co-Develop. “From promoting financial stability to driving inclusion, its impact is as expansive as it is transformative.”

Financial Stability Through Instant Payments

At the core of DPI lies instant payment systems, which can significantly enhance financial stability. These systems enable real-time fund transfers, mitigating risks that often destabilize financial ecosystems. For example, Brazil’s Pix system has revolutionized payments, settling transactions in an average of three seconds while improving cash flows for businesses.

“An African equivalent of Pix could transform how micro and small enterprises operate,” notes Karanja. “By offering a safer, quicker alternative to cash that enhances both operational efficiency and financial stability, we can empower businesses to thrive. This can in turn boost the continent’s economic resilience.”

The benefits are far-reaching. Instant payments promote liquidity, enabling individuals and businesses to meet short-term obligations without relying on expensive credit options. Moreover, the transparency of these systems builds trust in formal financial institutions, attracting users from informal markets and increasing the flow of money within the formal economy.

Interoperability: Connecting the Continent

For DPI to succeed, interoperability is non-negotiable. However, the journey to achieving interoperability in Africa has been fraught with challenges, including disparate regulatory frameworks, technical gaps, and data security concerns.

“Policy coordination across borders is a challenge we cannot ignore,” explains Garikai Nhongo, Senior Communications Manager, Co-Develop. “African central banks operate under different regulatory and financial systems, complicating interoperability. Regional coordination mechanisms like COMESA and SADC could mitigate these discrepancies.

The lack of IT infrastructure to seamlessly integrate DPI across borders and weak data security, which is increasingly raising concerns about cybersecurity vulnerabilities and compliance with privacy laws, are also significant barriers to interoperability.”

Despite these hurdles, the potential benefits of interoperability are immense. By enabling seamless financial flows, interoperability can support the full realization of the African Continental Free Trade Agreement (AfCFTA), which is a cornerstone for economic integration. It will also reduce operational costs for businesses, making cross-border trade more accessible and cost-effective.

“Interoperability isn’t just about technology; it’s about creating a unified financial ecosystem that works for everyone,” adds Nhongo. “It’s the key to unlocking Africa’s true economic potential.”

The Power of Data-Driven Policy

Beyond facilitating financial transactions DPI can also harness a wealth of data to advance data-driven policymaking. DPI enables the aggregation and analysis of transaction data that central banks can leverage to monitor economic trends, improve credit systems, and design targeted interventions during crises.

“Data from DPI is like a crystal ball for central banks,” says Karanja. “It gives us real-time insights into inflation rates, spending habits, and credit markets, enabling more informed decisions, which is extremely important in the ever-evolving macroeconomic environment.”

Aside from helping financial institutions evaluate borrower creditworthiness to promote responsible lending and expand access to financing, DPI can also be leveraged to improve social safety nets for the most vulnerable. For example, during the COVID-19 pandemic, DPI could have streamlined the distribution of social welfare to the most affected populations. Similarly, transaction data can inform inflation-targeting measures and identify underserved regions for financial inclusion programs.

“Data-driven policymaking is how we make governance smarter and more inclusive,” adds Nhongo. “It’s about using technology to solve real-world problems in real-time without leaving anyone behind.”