Klasha Business

    July 26, 2023

    What are the growth opportunities for cross-border payments in Africa?

    Cross-border payments are important in today's global economy. It has emerged as a vital catalyst for economic development, especially in Africa. The seamless flow of funds across borders is important in promoting trade, investment, and financial inclusion. According to Statista, the revenue in the e-commerce market in Africa is estimated to amount to 67.78 billion dollars in 2027.

    Cross-border payments have increased for several years, with growing volumes being transacted each year. A report by Mckinsey estimates Africa's electronic payments market to grow by 152% from 2020 to 2025. This is because there are billions of dollars being moved across borders daily in a way that benefits both sender and receiver, especially now that payment methods are becoming more efficient and new ones are emerging.

    In this article, we will explore the impact of cross-border payments on businesses, factors driving the growth of payments in Africa, and challenges that international businesses may encounter when expanding into Africa.

    Cross-border payments in Africa

    Cash was the major transacting method before the evolution of cross-border payments in Africa. Cash was king. Carrying physical cash across borders was a medium that was neither sustainable for large transactions nor safe.

    Early traditional methods of cross-border payments were bank drafts, postal money orders, and telegraphic transfers. These methods were often time-consuming and relied on physical documents, resulting in high costs and delays.

    Cross-border payments in Africa have undergone significant developments in recent years, driven by technological advancements, regulatory reforms, and increasing global economic integration. According to industry projections, the cross-border payment industry was predicted to reach an estimated $156 trillion by 2022. The common payment methods in Africa are:

    • Traditional banking channels

    • Mobile money: E.g., M-PESA in Kenya

    • Digital payment platforms

    Since COVID, Africa has experienced an increase in cross-border payments infrastructure. This means of payment serves many African sectors and industries, especially businesses seeking to expand internationally. As digital payment infrastructure continues to develop and financial inclusion efforts gain traction, Africa's electronic payments market is poised for significant expansion, offering numerous business opportunities in the region.

    Impact of cross-border payments on African Businesses

    Facilitate international trade: Cross-border payments enable African businesses to engage in international trade by facilitating the smooth transfer of funds for imports and exports. It also contributes to reducing transaction costs, eliminating currency barriers, and enabling seamless settlement, which is crucial for improving Africa's trade capabilities.

    Access to global markets: Cross-border payments give African businesses a stage in the global industry. By enabling the transfer of funds internationally, businesses can expand their customer base beyond domestic regions and tap into new opportunities and sources of revenue. Different sectors, like agriculture and manufacturing, have so much to gain. Labour is also not exempted, as Africans can seek international jobs and get paid without physically leaving their country's shores.

    Risk diversification: With access to global markets, businesses can diversify their portfolios by expanding their customer base and supply chains beyond their domestic borders, therefore, diversifying risks. Gaining access to an international audience allows business owners to reduce their reliance on a single market, mitigating the impact of local economic fluctuations, increasing resilience, and increasing financial inclusion by connecting previously underserved businesses to the global financial ecosystem. According to the Global Findex Database 2017, over 66% of sub-Saharan Africans have access to formal financial services.

    In today's global marketplace, efficient cross-border payments are crucial for international business success, especially when expanding to Africa. Here are some key reasons why:

    Seamless customer experience: By offering localized and familiar payment options to customers in different regions, businesses can enhance the overall customer experience. This includes accepting regional payment methods, mobile wallets, digital currencies, and popular international payment systems.

    Increase in sales: Facilitating smooth cross-border payments enables businesses to capture new market segments and generate revenue from untapped markets. By removing barriers to international transactions, businesses can attract and retain customers from diverse locations.

    Supplier and partner relationships: Streamlined cross-border payment processes strengthen relationships with suppliers and partners across international borders. Efficient payments reduce transactional friction and foster trust, resulting in smoother collaborations and increased supplier and partner satisfaction.

    Factors for driving growth in Africa

    According to a SWIFT white paper, SWIFT connects and serves more than 20 payments market infrastructures in Africa and supports what they call the “third-generation of payment in Africa.” We looked into some of the factors driving growth in Africa below:

    E-commerce: The rise of e-commerce and online marketplaces in Africa has been key in driving cross-border payment growth. Increased access to global markets, international trade among emerging markets, and simplified payment processes have rapidly increased cross-border transactions. E-commerce platforms have also revolutionized payment systems, offering convenient and secure online payment gateways. For example, with Klasha, businesses can integrate Klasha Pay to accept payments on their online stores instantly. According to African Business, Africa is becoming one of the fastest-growing e-commerce and social commerce markets globally. The African e-commerce industry is expected to grow at a compound annual growth rate of 24.7% between 2017 and 2024. This lucrative industry has granted many businesses and consumers access to what is available in the global market. This increases purchasing power, profit, and financial inclusion across the continent.

    Changing consumer behaviour: Due to increasing internet penetration, smartphone adoption, and the rise of e-commerce platforms, there has been a change in consumer behaviour in Africa. More people are interested in travel and international tourism, have access to smartphones to make payments, find more tech-inclined ways to transport themselves (Uber, Bolt), and order from foreign stores. As of 2021, the percentage of mobile phone ownership among adults in emerging economies had risen to around 83%. These new trends have opened up a greater market for businesses in Africa and international businesses looking to open branches. Consumers are now less willing to pay for banking services while expecting them to adapt quickly to a changing society. They expect payments to be sent and received in just a few clicks, like they set up their smartphones. As African consumers become more tech-savvy and connected to the world, the future holds great potential for further advancements in cross-border payment solutions.

    Role of Fintech Companies: In recent years, Africa has witnessed a remarkable transformation in its financial landscape, thanks to Fintech companies, especially in some of the fastest-growing economies (Nigeria, Egypt, South Africa, and Kenya). According to McKinsey, 10% of transactions in Africa are now digital. Fintechs have now become major players in the African financial services sector. New solutions require cross-border payments happening around the continent; these innovations give Africans access to the global stage. Before, consumers had to wait weeks before completing an overseas transaction with the bank. Now, there are alternative solutions for that. Fintech companies have transformed traditional financial systems through innovative solutions, increasing financial inclusion and transaction speed. For example, With Klasha Wire, you can access the most negotiable rates in the market and a 24-to-48-hour payout time instead of the standard 7 to 21 working days timeline that traditional financial institutions provide.

    Challenges for businesses using cross-border payments

    Delayed transactions: Although there has been significant improvement in transactions in cross border-payments, they are still not instant. Processing payments can take two to seven working days, sometimes even longer. This delay in settlement causes inconvenience and potentially impacts business operations.

    Security: As cross-border payments rely heavily on digital infrastructure and technology, they become susceptible to cyber threats. The potential risks include data breaches, identity theft, fraud, and unauthorized fund transfers. Phishing attempts and scams can compromise security and lead to financial losses.

    Regulation and compliance: Navigating different countries' regulatory and compliance landscapes can be challenging for businesses engaging in cross-border payments. Different countries have distinct regulations and compliance requirements for cross-border payments, particularly concerning anti-money laundering (AML) and KYC regulations. Adhering to these regulations while ensuring secure transactions can be complex and challenging for international businesses.

    How to overcome some of these challenges

    Make compliance a priority: Staying informed about regulatory frameworks and compliance requirements in the target African countries is crucial. Engage legal and financial advisors with expertise in international transactions, especially when opening up in a new country, to help your business adhere to local laws, anti-money laundering regulations, and data protection requirements.

    Take strict security measures: Businesses should have security standards like two-factor authentication, and data encryption, conduct due diligence for high-risk customers or transactions, and collaborate with regulatory authorities in the country where they operate in.

    Partner with expert payment providers: Collaborating with experienced payment providers like Klasha, specializing in cross-border transactions, can simplify the process. These providers possess knowledge of regional regulations, payment infrastructures, and risk management, enabling businesses to navigate complexities efficiently.

    Simplify cross-border payments with Klasha

    Klasha Business is a simplified solution that helps merchants sell in and from Africa, receive payments in local African currencies, send large payments overseas, and manage their business from a multi-purpose dashboard.

    We wrote a detailed article for business owners on how to send and receive cross-border payments with Klasha. An example of a company that uses Klasha for cross-border payments is Spoynt, a fast-growing Fintech disruptor headquartered in the United Kingdom with teams in Estonia, Azerbaijan, Switzerland, Ukraine, and Turkey. Read all about Spoynt’s case study here.

    Klasha is currently ISO 27001 certified and PCI-DSS compliant and is licensed by the Central Bank of Nigeria. Our technology also ensures data encryption, the safety of the transfers, and the storage of all sensitive information.


    Cross-border payments continue to catalyze economic growth in Africa by enhancing trade, promoting financial inclusion, risk diversification, and growing the economy.

    As cross-border payments become more efficient and accessible, the barriers to entry for businesses and individuals to engage in global commerce are significantly reduced, leading to more sustainable economic growth.