Product Update

How can cross-border payments for Africa’s renewable energy industry be accelerated with cutting-edge technology?

By Sophie Proctor, February 16, 2023 ·
renewable energy blog

Africa is a continent ripe for renewable energy innovation with the adoption of wind and solar resources a key solution to addressing energy poverty. According to the World Economist Forum, as of 2019, the electricity access rate stood at 46% with 570 million people remaining without access. By 2050, Africa’s population will reach two billion. This further shines a light on the importance of renewable energy, to not only reach sustainability goals, but to provide a reliable and crucial source of energy for millions across the continent. However, cross-border payments are traditionally slow, costly, and hinder growth for the renewable energy sector. We’ll be taking a look at this, the positive impact this could have on such an important industry in today’s climate, and how Verto can help provide the solution.

Understanding Africa’s potential

According to data from Energy, Capital & Power, Africa has an estimated 10 terawatts of solar capacity, 350 gigawatts of hydro, and 110 gigawatts of wind. Some areas are starting to adopt expansive solar facilities, such as Morocco and Egypt, but there is ample room for further renewable energy resources to be put in place. This makes it a crucial sector to watch in emerging markets, with room for both innovation and growth. However, cross-border payments remain an issue and can suppress the development of resources and expansion across regions in need.  

The use of alternative payment methods, such as digital wallets, is increasing in the infrastructure industry at a compounded annual growth rate of up to 30%. However, the renewable energy sector seems to fall short with the majority of cross-border payments still being made through traditional methods, such as wire transfers and cheques. Not only does this result in delays to funds landing in the recipient's account, but transaction fees can add up quickly to make it costly and inefficient. So, what’s the reason for this reluctance to catch up to more innovative payment methods, and what impact would this switch have on renewable energy businesses in emerging markets like Africa?   

Out with the old

There are several reasons why the renewable energy sector is reluctant to adopt these alternative payment methods. This includes a lack of awareness, not having the appropriate technology that has these capabilities, regulation concerns, and a resistance to change over concerns of interrupted operations or preference for traditional methods. Sticking with the traditional methods, however, may be leaving these businesses vulnerable to problems that prevent them reaching their full potential. Common issues surrounding traditional methods are the high costs associated with cross-border payments, from high transaction fees, long settlement times, and losses due to exchange rate fluctuations. There may also be the perception of digital wallets being an increased cybersecurity threat and a lack of clarity around them being a safer alternative payment method.

Understanding the benefits of enhanced financial technology and digital payment methods such as wallets could be the necessary steppingstone for renewable energy companies to reach their growth goals and innovate African markets. This often will involve a transition to a new payments provider that’s not a traditional bank, but will offer the solution to the problems associated with the traditional methods.

Acceleration of digital wallets

Adoption of digital wallets is on a fast upward trajectory in emerging markets, particularly in Southeast Asia where consumer numbers are projected to reach 310m by 2025, according to Bain & Company. This study also found that India and China accounted for 70% of the world’s 2.1bn digital wallet users. In comparison, it was found by McKinsey that only up to 7% of all transactions in Africa were made via digital payments, compared with 50% in Turkey. The adoption of digital wallets not only presents an opportunity for renewable energy companies to grow across the continent, but also connect with other businesses using this payment method.

For renewable energy firms, remaining innovative with clean energy solutions to reach sustainability goals is imperative, but may need to go hand-in-hand with innovative technology. Accessing digital financial services catered to delivering solutions to African markets provides support for business growth, improved way of life, and ultimately, a better planet. 

Enter Verto. We strive for financial inclusion for businesses across emerging markets to reach financial goals and build stronger customer bases. Our multi-currency wallets support more than 50 currencies for instant transfers, no limits on wallet storage, and easy conversion between wallets at the best FX rates. Find out more about our multi-currency wallets.

Opportunities for Africa’s renewable energy

According to the World Economic Forum, an estimated 60% of healthcare facilities in Sub Saharan Africa don’t have access to a reliable electricity supply. This presents a strong use case for renewable energy solutions like solar panels or wind turbines to provide a source of energy. With digital wallets, it can improve security and flow of funds, rather than relying on cash payments, cheques, or slow bank transfers with multiple touchpoints. 

There has already been attention on the growth opportunities for renewable energy from Jack Dorset’s digital payments company Block, and the bitcoin-focused venture firm Stillmark, who led a $2m seed investment into Gridless, a Kenyan-based bitcoin mining company. This investment will help open more mines across Africa. According to Gridless’ founder, Erik Hersman, the power generation and mini-grids will help solve the power access issue that roughly 600 million across Africa face.

Evidently there is ample opportunity for renewable energy businesses to help the issue of energy access across Africa. The adoption of improved financial technology and alternative payment methods like digital wallets can bring growth opportunities for the renewable energy sector and could be transformative for people and businesses across Africa.

Get started using Verto today for better business growth  and let us help you to make a difference.