Transfers, cash dominate cross-border payment in Africa — Report

A new report by Duplo, a fintech company, has revealed that traditional banking channels, including bank transfers and cash payments, have continued to dominate the African cross-border payment landscape despite the increasing presence of fintech companies.

According to the report titled ‘The State of Cross-Border B2B Payments in Africa and its Impact on Trade,’ cash payments remain a significant component of informal cross-border trade in parts of West and East Africa, accounting for 40 percent of payments.

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Although these traditional channels still manage large-value business-to-business (B2B) transactions, they are often burdened by high fees and prolonged processing times. “This creates opportunities for fintech companies to offer alternative solutions, particularly for small and medium-sized enterprises (SMEs) engaged in cross-border trade,” the report stated.

The report further highlighted the size of the B2B retail payments market in Sub-Saharan Africa, which the World Bank estimated at $1.5 trillion.

“In this market, 48.4 percent of companies rely on local banking partners for cross-border transfers, while 51.6 percent utilise other payment channels,” it disclosed.

In its report, Duplo expects the demand for efficient, low-cost, cross-border B2B payment solutions to grow. This will pose a challenge and an opportunity for financial institutions and fintech companies to develop solutions that cater to the diverse needs of African businesses, from small traders to large corporations.

According to the report, cross-border B2B payments are a crucial driver of intra-African and extra-African trade. The report suggested that the demand for such payment solutions could lead to changes in the financial landscape, especially the involvement of fintechs offering innovative services.

In 2012, the Central Bank of Nigeria launched its cashless policy, which was meant to curb excessive cash handling and curtail the volume of cash in circulation. The policy was introduced to drive the development and modernisation of payment systems capable of placing Nigeria among the top 20 economies in the world.

The report further revealed that the volume of e-payment transactions increased from N27 trillion in 2012 to N1.5 quadrillion in 2022. “This shift is driven by factors such as increased smartphone penetration, improvements in internet connectivity, and a growing fintech ecosystem,” it said.

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The COVID-19 pandemic also accelerated the adoption of digital payment solutions, with many businesses turning to online platforms to continue operations during lockdowns, the report noted. “Indicating that the shift is likely to have long-lasting effects on B2B payment processes across the continent.”