Swift data shows African inter-bank clearance on the rise and African currencies gaining
Swift, the international inter-bank digital payment and clearing platform this week released a report indicating that the use of African currencies between African banks is on the rise, and that most African banks have reduced their need for foreign correspondent banks. The report was released at the 25th Swift African regional conference in Kigali, Rwanda.
Head of sub-Sahara Swift, Denis Kruger, said “Africa’s transaction banking landscape is evolving as a result of a variety of macroeconomic factors which will continue to shape Africa’s banking sector in the years to come. Digitisation and technological innovation will also play an increasingly important role. To be successful, pan-African players will need to carefully monitor these forces so that business can be well positioned to benefit from potential shifts.”
Titled “Africa Payments: Insights into African Transaction Flows”, the Swift report shows a significant increase in intra-African commercial payments, with almost 20% of all cross-border transactions going to African recipients. This constitutes a 19.7% increase since 2013. Intra-African clearing of payments has also increased, from 10.2% in 2013 to 12.3% in 2017 indicating a rising number of transactions cleared by African banks without the need for a non-African correspondent bank.
The use of local currencies such as the West African franc and South African rand is increasing. Use of the franc for cross-border payments has overtaken the rand and the British pound, accounting for 7.3% of payments in 2017, up from 4.4% in 2013. The rand has seen a smaller increase in cross-border payments from 6.3% to 7.2%.
Banks in the United States are still the main payment route of financial flows but their dominance is declining, having come down from handling 41.7% of all African payments to 39.5%. Similarly, US dollar transactions have decreased from 50% in 2013 to 45.1% in 2017.
However, Europe’s share as a clearing and trading partner is on the increase, going from 26.4% in 2013 to 28.6% in 2017 for commercial flows while the United Kingdom’s share has dropped slightly.
The Swift report is based on unique data and analysis from Swift Business Intelligence. This portfolio of tools, including analytics, insights and economic indicators, provides granular detail on Swift traffic across a variety of metrices, including currency, product type and value, and enables financial institutions to track market evolution.