Speed, affordability top priorities for Africa’s cross-border solutions

Cross-border payment solutions are becoming essential for African businesses and consumers are prioritising speed, affordability, accessibility, and reliability to improve productivity.

According to the Emerging Trends in Cross-Border Payments report. as Africa’s trade and digital economy grow, the ability to send and receive payments quickly and affordably is becoming a non-negotiable requirement.

Remittances make up over five percent of the gross domestic product in 15 sub-Saharan African countries. The actual volume of remittances is believed to be even higher, as many transfers occur through informal channels.

The World Bank recorded that remittance flows to Low and Middle-Income Countries (LMICs), of which Nigeria is part, slowed between 2022 to 2023, reaching an estimated $656 billion in total, only 0.77 up, in contrast to the period from 2021 to 2022 when it rose by 8.3 percent.

The report added that small businesses and freelancers rely on instant payments to maintain cash flow. Delays in receiving funds can disrupt supply chains and stall operations.

“Affordable solutions with clear, transparent pricing are also crucial, as high transaction fees can erode the tight margins that many businesses operate on. Companies addressing these concerns are finding success by reducing fees, offering competitive exchange rates, and leveraging digital currencies to streamline transactions,” it said.

Fighting high remittance fees with technology and collaboration

The report analysed that remittance fees in Africa remain among the highest globally, often exceeding 8-10 percent of transaction values. These high fees create a heavy burden on millions who rely on international money transfers for essential expenses, including daily living, education, and investment.

“No more surprise fees. Nobody likes hidden costs. Providers need to be crystal clear about fees and guarantees. Think flat fees, upfront cost breakdowns, and locked-in rates that don’t change halfway through,” said Nimide Fala, VP of Client Experience at Zest.

Africa’s fragmented financial networks contribute to these high fees, as multiple intermediaries increase costs. According to Oluwaseyi Otunla, COO of OneKard, “Companies can partner directly with local banks, mobile money operators, and fintechs to eliminate these intermediaries. For example, fintechs can negotiate bulk rates for currency conversion.”

Read also: AI and Blockchain are Transforming Cross-Border Payments in Africa

African fintech companies, including Flutterwave, Chipper Cash, and MFS Africa, are spearheading innovations to provide efficient and cost-effective cross-border payment solutions. These firms leverage advanced technology to reduce fees and offer competitive exchange rates while facilitating seamless transactions.

Blockchain technology is also proving to be a game-changer in reducing costs and enhancing transparency. “Blockchain enables instant settlement across borders without intermediaries, which is a game-changer for African economies reliant on remittances,” the report noted.

Platforms like Bitnob utilise digital assets to facilitate low-cost, borderless transfers, offering competitive exchange rates and near-instant settlement times. Mobile money services are also transforming the landscape by enabling direct transfers without bank involvement, further reducing costs.

The report added that innovation will continue to shape the future of payments across Africa. Artificial Intelligence (AI) is expected to play a significant role in enhancing transaction speed and security through advanced fraud detection and smarter risk management systems.

Digital currencies, including cryptocurrencies and central bank digital currencies (CBDCs), also hold promise in reducing transaction costs and expediting cross-border payments by eliminating the need for traditional foreign exchange processes.

“Contactless payments will transform how people pay in Africa in the next few years. Imagine being able to use your Nigerian card in Morocco without any hassle. That’s the kind of simplicity we need,” the report said. Virtual cards are expected to drive this transformation by offering a faster, more secure, and cost-effective alternative to physical cards.

Dickson Nsofor, chief executive officer, Kora, believes that decentralised finance will revolutionise financial autonomy. “I’m excited about DeFi. It puts people in control of their money by removing middlemen and lowering fees, making it easier for people to connect and do business across Africa and beyond,” he said.

Sectors poised for growth in cross-border payments

Several sectors are primed for growth as cross-border payment solutions continue to evolve. E-commerce and Digital Marketplaces: Platforms like AliExpress, Shein, and Temu are making international shopping easier by streamlining payment processes and breaking down barriers for African consumers.

Freelancing and Remote Work: The rise of global hiring, especially by U.S. and European companies tapping into Africa’s talent pool, is driving the demand for efficient cross-border payroll systems.

Travel and Tourism: As travel rebounds post-pandemic, tourists increasingly seek seamless, cross-border payment options to avoid currency conversion challenges.

International Trade and SMEs: Small and medium-sized enterprises (SMEs) are major drivers of cross-border payments. These businesses depend on affordable payment solutions to pay international suppliers, particularly in global manufacturing hubs like China.