Historically, traditional banks monopolized the cross-border payments in Africa. These banks faced little competition, hence cross-border transactions were subject to pain points for both private consumers and businesses, including a lack of transparency, long settlement periods, high transaction costs, and limited accessibility.
With new companies entering the payments industry and customers’ demands continuously evolving, the pressure is on to create faster, more efficient, innovative, and transparent cross-border payment solutions in Africa.
Business models are evolving, and the international remittance payment process is undergoing a much-anticipated transformation.
In 2020, G20 made improving cross-border payments a priority. This involved identifying the cross-border payment difficulties that stem from a series of frictions in existing processes, as well as establishing a set of building blocks to address them.
What are cross border payments?
Transactions involving persons, organizations, banks, or settlement institutions operating in at least two separate countries are referred to as cross-border payments. Global cross-border payment flow is anticipated to hit US$156 trillion in 2022, according to experts.
The cross-border payments market has always been riddled with inefficiencies, both in terms of cost and time, resulting in high transaction fees and intricate, time-consuming payment processing techniques.
Businesses will have more control over foreign payments and payment security as a result of the global push to strengthen cross-border payment techniques.
Cross-border payment challenges
Cross-border payments are at the core of international finance and economic activity. However, there are four long-standing key challenges that face cross border transactions:
- High costs
- Low speed
- Limited access
- Lack of complete transparency.
Enhancing cross border payments by making them faster, cheaper, more transparent and inclusive would have widespread benefits for supporting economic growth, global trade, development and financial inclusion.
But delivering change is a slow process, and practical implementation of new competitive cross-border payment strategies across all countries requires worldwide cooperation.
The traditional banking approach is currently being challenged by emerging alternative solutions, and Fintech companies are making huge waves in the cross border payment system. One of which is Changera
You can download Changera on iOS or Android
Editor’s note: This article is the first part of a series on Africa’s cross-border payment landscape and how it is changing.
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