Fintech is set to revolutionize cross-border payments in Africa.

Mark Dankworth, President of Business Development for Africa at Ukeshe Technologies, a Pan-African fintech enablement partner, says fintech is at the forefront of improving cross-border payments on the continent.

“Over the last five years, there has been a significant increase in financial transactions on digital platforms. As mobile phone penetration in Africa continues to accelerate, the continent is poised to take the next steps towards cross-border solutions that are inexpensive, fast and reliable.”

“As the next frontier, new technologies for major expansion and innovation are essential to unlocking enormous untapped potential,” Dankworth said.

The most expensive cross-border payments on earth

Estimates indicate that about 30 million Africans live outside their country of birth, accounting for about $47 billion in remittances to sub-Saharan African countries alone.

Despite high demand, toll corridors between Africa and the rest of the world are the most expensive in the world. “

Remittances average 8 to 10 percent of the value of each transaction, costing the continent nearly $4.7 billion, which is significant in any context,” Dankworth said.

He said the success of the mobile phone-based money transfer service in Africa shows the appetite in the market for secure and cost-effective ways.

“In many markets, most remittances are sent through physical agents, who are often subject to high transfer fees. Nigeria is an example of a high net worth market (about $18 billion imported into the country) where residents in the United States, United Kingdom and Europe are looking for clear and reliable ways to support their families back home.

Late and delayed payments

Unreliable systems and cash shortages are other recurring challenges to free cash flows in Africa. Cash-to-cash services, while faster than traditional banking methods, often attract higher fees, and can often require recipients to travel long distances to collect the full amount owed to them in times of cash shortages.

“Often, the difficulty is not in sending money, but in receiving it. A new breed of fintech solves these issues by floating money in receiving country markets, allowing them to successfully complete international transactions based on cash flow-dependent remittances,” says Dankworth.

He added that there has been some change in the ‘instant gratification’ model of cross-border payment, which requires a fast process and is widely practiced in various African countries.

Much depends on the ability of fintech companies to move funds through different channels, the availability of freely available currency in a particular market, regulatory requirements, as well as the presence of ATM machines in certain countries, among others.

Control tests

Thanks to the number of intermediaries involved in transferring money from one country to another, regulatory challenges prevent easy money transfers. Adding to the complexity is that each country has its own set of regulations, making cross-border payment systems slower and sometimes less secure than digital alternatives.

“Ukheshe is currently partnering with banks to offer new SaaS models that overcome regulatory challenges,” says Dankwerh.

Seamless cross-border future travel

There has been a clear acceleration in demand for online money transfers as African consumers become more comfortable with digital payment solutions. Dankworth says technologies like digital wallets and payment gateways are some of the ways fintech is simplifying complex cross-border payment processes and improving ease-of-use and convenience for consumers.

“Decreasing the cost of remittances is the biggest opportunity in the market. In Africa, enabling customers to feel in full control of their money and the solutions they use are seamless, interoperable and easy to use, is where fintech enablement partners like Uksheh are making the biggest impact.”