East Africa’s payments war pits central banks vs telcos over interoperable rails, shaping a $2T digital economy.
⚔️ EAC Payments War: Rails vs Telco Control
A Quiet Financial Power Struggle
Across the East African Community, a structural conflict in digital finance is intensifying. On the surface, payment systems appear stable and highly successful. However, beneath the surface, a power struggle over control of transaction infrastructure is accelerating.
On one side are central banks, pushing for interoperable payment rails. On the other are telecom operators, defending closed mobile money ecosystems that have become highly profitable.
As a result, East Africa is entering what analysts increasingly describe as a payments architecture war—not fought with regulation alone, but with system design itself.
The Two Competing Systems
First, central banks across the region are building interoperable payment infrastructures. These systems aim to allow money to move seamlessly across banks, mobile wallets, and fintech platforms.
For example, regulators are prioritising:
- Unified switching systems
- Standardised APIs for payments
- Real-time settlement across institutions
In addition, these systems are designed to reduce dependency on any single operator. Therefore, they promote financial neutrality and competition.
Telco Model: Closed Ecosystems Under Pressure
In contrast, telecom operators continue to operate closed-loop mobile money systems. These platforms dominate retail payments in many East African markets.
Their model relies on:
- Proprietary wallets
- Controlled merchant networks
- Internal transaction routing
Because of this structure, telcos retain strong control over transaction fees and user ecosystems. However, this dominance is now being challenged by regulatory reforms.
The Numbers Behind the Conflict
The scale of the system explains why the conflict matters.
- In several East African markets, mobile money transactions exceed 50% of GDP
- Cross-border payment costs remain between 5% and 10% per transaction
- Millions of daily transactions flow through mobile-first financial systems
These figures show that mobile money is no longer a niche service. Instead, it is now a core layer of national and regional economies.
Therefore, whoever controls the infrastructure also influences economic velocity and transaction costs across the region.
Why Central Banks Are Pushing Interoperability
Central banks argue that closed systems create market inefficiencies and high transaction costs. As a result, they are pushing for interoperability.
Their objectives include:
- Lowering remittance and trade costs
- Increasing competition in payment services
- Improving monetary policy transmission
Moreover, interoperable systems allow regulators to monitor flows more effectively. Consequently, this strengthens oversight and financial stability.
Why Telcos Are Resisting
Telecom operators, however, view interoperability as a threat to their business model. Mobile money platforms generate significant revenue from:
- Transaction fees
- Merchant payments
- Value-added financial services
If systems become fully interoperable, telcos risk losing exclusive control over customer ecosystems. Therefore, resistance is both economic and strategic.
Global Parallel: India’s Digital Payments Shift
The situation closely mirrors developments in India.
India’s Unified Payments Interface (UPI) disrupted private wallet dominance by creating a national interoperability layer. As a result, payment flows became standardized, low-cost, and highly scalable.
Similarly, East Africa is now facing a structural decision:
- Maintain fragmented, closed ecosystems
OR
- Move toward unified national/regional payment rails
Therefore, the outcome could reshape the entire financial architecture of the region.
Economic Stakes: A $2 Trillion Direction of Travel
While current transaction volumes are already significant, the long-term trajectory is even more important.
If East Africa’s digital financial systems continue expanding, analysts project that the broader digital economy ecosystem could approach $2 trillion in cumulative activity over time, driven by:
- Trade digitisation
- Mobile-first commerce
- Cross-border integration
- SME financial inclusion
Therefore, the design of payment infrastructure becomes a macro-economic decision, not just a technical one.
