E-wallets: the future of payroll in Africa?

e wallets in Africa

New Year, new payroll trends!

E-wallets have been picking up speed for some time now, especially in Africa. Caught in between these hyper-modern digital payment solutions and a traditional cash system, the financial playground in Africa is interesting to say the least.

But while the cash system is well-documented and well-understood, one can’t say the same about e-wallets.

Where do they feature in the African financial landscape?

How do they work, who do they benefit, and are they the future of payroll?

We answer these questions and more in this article.

Digital wallets, e-wallets, mobile wallets: what are they?

Digital wallets and e-wallets refer to the same concept. They are applications or programs that store a person or a company’s private payment information and passwords in cloud storage.

E-wallets v/s Digital Wallets v/s Mobile Wallets

Digital or e-wallets are accessible via all types of devices: desktops, tablets, mobile phones and more. The term mobile wallets, however, specifically refers to e-wallets used on mobile devices. Mobile wallets tend to be some of the most common ways to use e-wallets.

How does a digital wallet work?

With the help of software, a digital wallet can connect your bank account and payment information to the merchant whom you are paying.

Different applications provide different kinds of access; for example, open wallets (which are accepted by most stores) allow refunds, contactless in-store purchases, and internet purchases. Some apps even let you take out money from certain ATMs.

Some purchases can only be made with the wallet’s issuing merchant, a select group of sellers, or both with semi-closed and closed wallets.

How can an e-wallet benefit you?

With your payment information in storage and accessible everywhere with an internet connection, the need (and associated risks) to carry credit cards is significantly reduced.

Examples of Digital Wallet Services

Some of the most popular digital wallet services were created by software and hardware giants, giving rise to applications like Apple Pay, Google Pay, and Samsung Pay. But other digital wallet services are also thriving, with some existing for over a decade. Such players include Venmo, Cash App, Dwolla, Zelle and Paypal.

But the adoption of these services also depends on how well-accepted and catered for they are within a specific region.

A two-way effort is needed in that sense because you cannot make e-wallet payments to a merchant who does not have the infrastructure or technology to accept them.

Are e-wallets safe?

Doubts about safety and confidentiality when using digital wallets are very common.

After all, there are so many scenarios in which technology like this could go wrong. For instance, what if someone steals your phone? How easy would it be for hackers to take your data? Will you then risk losing your money?

No.

Since mobile payment methods are digitally tokenized and highly encrypted, your card information and account number are not saved in the digital wallet.

Your personal data is, in fact, encrypted and transformed into an individual code that can only be viewed by trusted parties once you add it to a digital wallet.

As such, not only are digital wallets not unsafe, they are actually safer than the alternative.

Advantages of digital wallets

Speed

E-wallet payments process faster when compared to traditional banking.

Why is that?

Because local payments are cleared more efficiently when using non-traditional routes. For businesses with rapid turnaround times or that require time-sensitive payment solutions, this kind of speed and efficiency gain can be a true game-changer.

Ease & convenience

Available on desktops, mobile devices and tablets, e-wallet application often offer easy-to-follow, user-friendly interfaces, simplifying the often complex process of payment. These applications are self-service ones, which means everyone can use them and there is no need for advanced training.

However, this is only applicable for individuals. As with everything else, matters do get a little more complicated when it comes to business transactions.

Lower transaction fees

With e-wallets, fees tend to be on the lower side when compared to traditional banking. This cost saving is a considerable motivating factor to move towards e-payments when it comes to payroll.

Different e-wallets, different currencies

Making international payments can be easier with e-wallets, as payments don’t go through as many processes as they do within a traditional banking system. As a result, currency conversion costs also go down.

Disadvantages of digital wallets

Limited acceptance

E-Wallets are becoming more and more popular, but not all retailers are yet willing to accept them. The effectiveness of your digital wallet may be limited by stores and companies who do not accept digital payments.

 

Technical difficulties

Digital wallets may be impacted by technical problems including device malfunctions, network outages, or software errors. It can be annoying when these problems make it hard to use your digital wallet or make payments.

E-wallets & Payroll

Because they have great faith in bank-level security, including data protection, most companies use banks for their financial transactions. However, e-wallets also include the same improved security measures that reduce the likelihood of hackers and information violations, like sophisticated encryption and fraud detection. Some also include multi-factor authentication capabilities, which add an extra degree of protection for companies handling extremely private or sensitive data like payroll.

As technology shifts and market penetration of e-wallets grows, a future where payroll in Africa is processed through e-wallets may not be so distant…

Be efficient and compliant, regardless of payment methods

Whether payments are made via bank transfer or e-wallet payments, the prerequisites of a good payroll system are the same: accurate calculations, timely processing, and compliance with local legislation. Africa HR Solutions will help you have a seamless payroll system.

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