The Journey to Easy Cross-Border Payments in Africa: Implications for Global Businesses

Expanding to new markets and acquiring users from those markets is a big opportunity if you are a global business.

But if expanding to Africa is on your radar, accepting payments and getting settled on the continent is a crucial building block in your expansion. And that — payment in Africa — is trickier than anywhere else in the world.

In Africa, money sent to a neighbouring country goes through multiple currency conversions before reaching its destination.

Picture this: Akwesi from Ghana needs to pay for a shipment of coffee beans to Nshuti in Rwanda. Since there are no local-to-local transfers in Africa, Akwesi's bank in Ghana will use a correspondent bank in Europe or the US to convert Ghana Cedis to dollars before converting into Rwandan Francs for Nshuti. This correspondent bank runs interference for Akwesi’s bank in Ghana but adds to the complexity and cost of the transaction.

In Africa, money sent to a neighbouring country goes through multiple currency conversions before reaching its destination

At the risk of being hyperbolic, the time it takes for all the above to happen would be enough for Akwesi to get in his Toyota Vitz and drive the money across borders into Rwanda himself.

This complexity costs Africans about $5bn in charges annually.

Regardless, it's essential to highlight the success stories. Here is an excerpt from the "Future of fintech in Africa 2023 report" by Kora and Finextra doing just that.

"Two years after the global financial crisis, Kenyan payments, money transfer and micro-financing service, M-Pesa, became the most successful mobile phone-based financial service in the developing world. Further, transaction flows sent by banks have grown by an average of 10% year-on-year during these ten years. Alongside this, mobile money payments have exploded, with the monthly value of transactions increasing 25 times over between 2010 and 2018."

In Africa, the digital payments market has grown faster than in Europe. In France, for instance, electronic payments grew from 33 million in 2009 to 61.5 million in 2018. But in Nigeria, electronic payment transactions increased from 66 million in 2008 to over two billion in 2018.

In Africa, the digital payments market has grown faster than in Europe.

Africa is on the rise, no doubt. But the African payment rails built on the premise that Africa mainly receives money from outside-in have left much to be desired. Existing rails are vertical (mostly outside-in) with almost zero horizontal payments rails that directly power transfers from one African nation to another.

Launching the Africa Continental Free Trade Area (AfCFTA) and Pan-African Payment and Settlement System (PAPSS) brings us closer to seamless cross-border payments. PAPSS aims to work like the traditional SWIFT networks but specifically for handling payments across Africa. It helps with transactions between different countries on the continent.

The growing presence of fintech companies in Africa offers a significant opportunity to revolutionise cross-border payments and promote healthy competition to connect the continent through a unified API.

Kora is at the forefront of building a pan-African payment infrastructure that enables businesses to enter Africa and connect with all 54 countries while supporting local enterprises accessing global markets. Although we appreciate the efforts of pioneering enterprises such as Interswitch, Cellulant, and e-tranzact, there's still a long way to go.

With regulators, innovators, and legacy financial institutions working from the same playbook, we will work faster to bring down unfriendly payment borders.

Ultimately, this enables international brands to set up shop in Africa because money can move easily within and outside the continent, improving African contribution to global trade.

About Kora

Kora is connecting Africa to the world via payments. For startups and businesses accepting money in and from Africa, we provide secure online payment channels and All The Support You Need™️ to start, scale and thrive on the continent. Learn more about Kora’s payment infrastructure for pay-ins, payout, and cross-border settlements at www.korahq.com