The future of cross-border payments in Africa

In a recent interview on CNBC Africa, the focus was on the future of cross-border payments in Africa. The conversation delved into the importance of understanding the need for faster, cheaper, and more transparent transactions to drive economic growth and financial inclusion, not only within the continent but globally. The G20 had also underscored progress in this area, emphasizing the urgency to address the challenges facing financial institutions and the interconnections between countries, particularly in Africa. The guests for this insightful discussion were Kagiso Mothibi, General Manager for MTN Fintech, and Dilip Ratha, Lead Economist and expert on cross-border payments at the World Bank. The key theme that emerged from the discussion was the necessity to revolutionize cross-border payments to catalyze development and empower individuals and businesses across the region. Here are some key takeaways from the conversation:\n\n1. High Costs and Inefficiencies in Cross-Border Payments: Dilip Ratha underscored the exorbitant costs associated with cross-border remittances, particularly within African countries. The average cost of sending money can be as high as 10%, resulting in substantial financial losses for lower-income individuals. Ratha highlighted that reducing these costs could unlock billions of dollars annually and redirect these resources to productive avenues, benefitting both senders and receivers. The inefficiencies and disparities in pricing within the region highlight the pressing need for innovative solutions to streamline cross-border transactions and make them more affordable and accessible.\n\n2. Role of Fintech Innovators in Transforming Payment Systems: Kagiso Mothibi shed light on the role of fintech companies like MTN in reshaping the cross-border payment landscape. By leveraging mobile technology and digital platforms, fintech firms can enhance the speed, efficiency, and affordability of transactions, thereby expanding financial services to underserved populations. Mothibi emphasized the importance of improving customer experience, reducing friction in the payment process, and extending service reach to remote areas to foster greater financial inclusion. Fintech players have the agility to innovate and customize solutions that cater to the unique needs of African consumers, enabling them to leapfrog traditional barriers and embrace digital payment systems.\n\n3. Regulatory Harmonization and Technological Advancements: The conversation also delved into the significance of harmonizing regulations and leveraging advanced technologies to streamline cross-border payments. Ratha highlighted the challenges posed by fragmented regulatory frameworks, multiple currencies, and diverse payment systems across African countries, leading to increased costs and market fragmentation. By aligning regulations, promoting interoperability, and welcoming new players with innovative technologies, the industry can witness a significant reduction in cross-border transaction costs. Mothibi reiterated the importance of regulatory flexibility and technological innovation in driving efficiency and transparency in payment channels, enabling seamless money transfers and promoting financial literacy among users.\n\nOverall, the dialogue between Mothibi and Ratha underscored the transformative potential of fintech solutions in revolutionizing cross-border payments in Africa. By addressing cost barriers, enhancing user experience, and fostering regulatory convergence, stakeholders can create a more inclusive and efficient financial ecosystem that empowers individuals, drives economic growth, and strengthens regional connectivity. As Africa embraces digital innovations and collaborative partnerships, the future of cross-border payments looks promising, promising significant benefits for both senders and recipients.