Cross-border payments in Africa, the state in 2023

Cross-border payments in Africa, the state in 2023

Cross-border payments are essential for facilitating trade, remittances, and financial inclusion in Africa, a continent with diverse and dynamic economies. However, moving money across borders in Africa is often costly, slow, and complex, posing significant challenges for consumers and businesses alike.

According to the World Bank, the average cost of sending $200 to sub-Saharan Africa was 8.2% in the first quarter of 2021, well above the global average of 6.5% and far from the Sustainable Development Goal target of 3% by 2030. Moreover, cross-border payments in Africa often suffer from low transparency, limited interoperability, and regulatory barriers that hinder competition and innovation.

Fintech companies are emerging as key players in addressing these challenges and transforming the cross-border payments landscape in Africa. Leveraging digital technologies such as mobile money, blockchain, and artificial intelligence, fintechs are offering faster, cheaper, and more convenient solutions for cross-border payments that cater to the specific needs of African consumers and businesses.

Some of the ways that fintechs are redefining cross-border payments in Africa include:

– Enabling direct transfers to mobile wallets and bank accounts, reducing the reliance on cash and agents. For example, Remitly allows African migrants to send remittances to mobile money accounts and wallets in over 20 countries across Africa, including MTN, M-Pesa, Airtel, Vodafone, and Tigo.

– Providing access to multiple currencies and exchange rates through online platforms and virtual wallets, minimizing foreign exchange volatility and transaction costs. For example, VertoFX is a B2B currency exchange marketplace and multicurrency wallet product that allows SMB clients to convert money from one currency to any of the other 30-plus currencies on its platform and hold the new currency in their wallet until they are ready to make a payment.

– Leveraging blockchain technology to enable fast, secure, and low-cost cross-border payments that bypass intermediaries and traditional payment rails. For example, BitPesa is a digital foreign exchange and payment platform that uses blockchain-based settlement to lower costs and increase the speed of business payments to and from frontier markets.

– Partnering with banks, regulators, payment networks, and other stakeholders to enhance interoperability, compliance, and customer protection. For example, Ukheshe Technologies is a pan-African fintech enablement partner that provides end-to-end payment solutions for banks, telcos, fintechs, and governments.

Fintech woes

Fintechs are set to play a vital role in shaping the future of payments in Africa, as they bring new innovations, entrepreneurs, and capital to the fast-growing electronic payments market. However, they also face significant challenges such as regulatory uncertainty, infrastructure gaps, cyber risks, and customer trust. To overcome these hurdles and unlock the full potential of cross-border payments in Africa, fintechs need to collaborate with each other and with other ecosystem players to create inclusive, interoperable, and sustainable solutions that benefit all stakeholders.

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Check out other Microsoft stories making the news across Africa and the Middle East region.

Visa, Flocash introduce Flostore to help small businesses accept digital payments

Visa, Flocash introduce Flostore to help small businesses accept digital payments

Visa is partnering with Flocash to introduce Flostore to help small businesses across Africa accept digital payments. It will also allow the businesses to manage supplies and access financial services across Africa. The Flostore solution consists of an integration of the Visa digital wallet and Flocash’s pan-African payment platform.

In addition to Flostore, Flocash and Visa will bring the element of analytics, bookkeeping and reconciliation to small businesses. Through Visa’s dynamic underwriting capabilities that include buying now pay later structures.

flostore flocash visa africa

Visa is committed to expanding the digitization of payments across Africa. With partners like Flocash, our goal is to enable African businesses to access our payments ecosystem and technologies to enable them to innovatively and efficiently serve their customers. This partnership with Flocash, as well as the launch of Flostore, are important steps towards achieving this goal.”

Corine Mbiaketcha, Vice President and General Manager for East Africa at Visa.

SMEs according to the International Finance Corporation (IFC) account for 90% of all businesses in Africa. But they have an annual financing gap of over US $136 billion. A digitized SME sector will unlock the huge market potential of the African continent underpinned by rapid population growth.

Through digitization, SMEs can use their digital footprint to tap into both traditional and alternative sources of funding. To expand commerce while banks lower operating costs as they increase their revenue base. Digitization of the lending process enables banks to streamline their inefficient processes for SME lending and deliver value to their customers. 82% of small and micro business respondents to Visa’s annual outlook survey in 2022 indicated a preference for digital payment options.

With a Flostore Tap2phone, small businesses will be able to turn their existing mobile devices into payment acceptance terminals. Tap2phone is an essential and cost-effective mechanism for developing digital payment infrastructure in developing markets.

“Flocash has grown significantly as a travel payments processor over the last few years. We are thrilled to partner with them to build innovative payment solutions that reduce friction in commerce for merchants in East Africa,” Mbiaketcha adds.

On the other hand, the CyberSource Payment Gateway technology incorporates all the safety protocols in place to give customers peace of mind as they transact online. With a design to provide increased fraud protection, minimize cardholder friction, and increase the completion of sales, leading to a better experience for all parties involved. This helps both merchants and issuers detect and avoid fraud more effectively. 

Visa is a great partner to scale Flocash’s pan-African payment platform and develop this critical area of African commerce that can offer enormous continent-wide economic development opportunities.”

Sirak Mussie, Managing Director of Flocash.

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