12 Feb Will Stablecoins be the Friendly Bridge Between Traditional Payments and full blown Adoption of Digital Payments Across Africa?

Stablecoins for Online Payment in Africa

Daily trading volumes in stablecoins kind courtesy of Stablecoin Index 

 

We have a feeling that stablecoins could be the bridge between our current traditional payment methods (cards, mobile monies and bank transfer) and the new world of digital currencies.  There were more than 200 stablecoins at the end of last year and its one of the fastest growing areas of fintech.

I’m just going to describe the most applicable types of stablecoins relating to payments for the purpose of this article:

Firstly there are fiat backed stablecoins for eg Tether, USDC, Gemini and many others which simply give you a digital token for the fiat currency they (are supposed to) hold to back it, and its value is pegged to the value of the currency represented.  

Secondly there could be a token that is backed by a basket of assets for example Libra envisaged by Facebook where they will hold a basket of currencies to back each coin they issue and the value is pegged to the value of the basket at any time.  

Thirdly there are stablecoins like DAI and TerraMoney that are not backed by anything and through a complex stabilising algorithm maintain their value in line with a currency or basket of assets.

We think that stablecoins are going to be a great bridge between traditional payments and full blown use of digital currencies across Africa.  There is a need for more stability, a more reliable store of value, frictionless digital payments, and cross border payments on and off the African continent.  

Stablecoin growth for payments in Africa

Imagine a Nigerian who is struggling with the volatility of the Naira and needs to pay for goods and services for eg from Amazon or to send money to a friend in the USA.  She buys for eg from Binance BUSD (the Binance USD stablecoin) which gives her a store of value and hedge against Naira fluctuations. She can send it to her friend at Binance in USA who cashes it out in USD or his currency of choice.  Or at the Amazon checkout she pays with BUSD which the merchant cashes out in USD and doesn’t have to bother with the currency restrictions and volatility of the Naira.  

Whilst consumers are not yet in the pure digital currency mindset, stablecoins are an easy to understand way for them to hold digital fiat AND enjoy all the benefits digital currency.

Stablecoins, as with cryptocurrency are 

  • borderless and money of the internet
  • can’t be easily stopped or censored
  • money can be moved at much lower costs
  • consumers are more in control of their money with less involvement from governments and third parties
  • less restrictions on what can and cannot be bought or paid for
  • flexibility in choice of currency for stability or ease of payment acceptability
  • safer and can’t be stolen as easily as cash
  • can facilitate participation in global markets
  • can be used to buy eCommerce goods and services globally
  • can often pay and get paid anonymously
  • can be programmed to automatically pay or get paid for eg a certain amount at a certain time based on a certain event.

Stablecoins are perfect for the African environment - we will keep you posted on how this plays out and as it becomes mainstream for our multinational eCommerce merchants.

Thank you for inspiration to Abra and Visual Capitalist

Please click here to get Mobile Money and Card online payment at the checkout for your Africa-wide expansion.

Services include: 

  • Nigeria
    • Online payment solutions
    • Credit card payments
    • eCommerce payments
    • Payment provider
    • Payment gateway
  • Kenya
    • Online payment solutions
    • Credit card payments
    • eCommerce payments
    • Payment provider
    • Payment gateway
  • South Africa
    • Online payment solutions
    • Credit card payments
    • eCommerce payments
    • Payment provider
    • Payment gateway

 

THANK YOU - THE TEAM AT AFRICAN PAYMENT SOLUTIONS