Developing cross-border payment solutions in Africa faces challenges like intricate regulatory frameworks, high fees, and delays in settlements. These issues have hindered trade within the continent, as discussed by panelists at an event in Lagos.
The complexity of cross-border payments extends beyond financial and legal aspects; it also involves technology. Each transaction requires integration of various payment technologies at different phases. Payments involve not only transferring funds but also exchanging data, such as validating amounts, verifying parties’ identities, and ensuring transaction authenticity within seconds. Expanding this process across borders adds complexities.
Describing cross-border payments as the movement of money between countries, Guy Stiebel, VP of Product at Cedar Money, highlighted that although these payments typically flow through the U.S. dollar system, the underlying infrastructure is outdated, relying on obsolete messaging systems. The inefficiencies and friction within this process make it challenging.
Complying with regulations across multiple jurisdictions poses a significant hurdle for startups offering payment solutions.
Addressing the difficulty in constructing cross-border payment products to function seamlessly across diverse markets, panelists emphasized the need to create a consistent product that meets local requirements while ensuring a cohesive user experience. Designing for multiple markets without compromising user experience presents a challenge.
Despite the obstacles, fintech companies aim to bridge the gaps in cross-border payments due to the market’s potential. With over 40 million Africans residing abroad and regularly sending money back home, there is a demand for faster and more cost-effective platforms that fintechs seek to leverage.
Stiebel remarked that fintech emerges when financial systems falter, and historically, cross-border payments have been plagued by inefficiencies, presenting an opportunity for technology companies to make a positive impact.