Africa’s cross-border payments system is broken. Despite a surge in fintech innovation, businesses and consumers still face high costs, slow transactions, and unreliable infrastructure. A new report from African venture firm Oui Capital, seen by Launch Base Africa, dissects the structural gaps holding back the continent’s financial integration — and highlights where startups and regulators could intervene.
The Problem: A Fragmented, Dollar-Dependent System
At the heart of Africa’s cross-border payments crisis is its reliance on outdated financial infrastructure. The report identifies five key pain points:
- No Pan-African Clearing System
- Unlike Europe’s SEPA or the US’s ACH, Africa lacks a unified clearing mechanism. Most intra-African transactions still route through correspondent banks in the US or Europe, adding fees and delays.
2. Illiquid FX Markets
- Many African currencies are thinly traded, forcing businesses to pay 5–10% in conversion fees — far higher than global averages.
3. Fintechs and Banks Don’t Talk to Each Other
- Poor API standardization means fintechs struggle to integrate with traditional banks, creating inefficiencies.
4. Slow Adoption of PAPSS
- The Pan-African Payment and Settlement System (PAPSS), designed to enable instant cross-border transactions, has seen sluggish uptake due to liquidity shortages and regulatory delays.
5. Overdependence on SWIFT
- African banks still rely heavily on SWIFT, which is expensive and slow compared to modern alternatives.
Emerging Solutions: Can Fintech Fix This?
The report outlines several potential fixes — some already in motion, others still aspirational:
- Real-Time Settlement Systems
- RTGS (Real-Time Gross Settlement) networks could bypass USD clearing, cutting costs and settlement times.
- Decentralized FX Pools
- Blockchain-based liquidity solutions, including stablecoins, could provide cheaper currency exchange without correspondent banks.
- Standardized APIs
- Open banking frameworks could improve interoperability between fintechs and banks.
- Alternative Networks to SWIFT
- Startups like Nala and Chipper Cash are building direct payment corridors, while PAPSS could eventually replace SWIFT for intra-African trade.
The Risks Holding Fintechs Back
Even with these innovations, fintechs face major hurdles:
- Regulatory Whiplash
Sudden policy shifts — like Nigeria’s crypto crackdown — create uncertainty. Compliance costs are high, with licensing processes taking years in some markets. - FX Volatility and Liquidity Shortages
Startups offering FX loans or multi-currency accounts risk insolvency if currencies crash (e.g., Nigeria’s naira devaluation). - Brutal Competition
Remittance fees have plummeted to 0.5–2%, squeezing margins. Customer acquisition costs ($5-$30 per user) further strain profitability.
Where the Market is Heading?
The report predicts three major shifts:
Decline of Traditional Remittance Giants
- African fintechs like LemFi, Geegpay, and Chipper Cash are undercutting incumbents (Western Union, MoneyGram) with lower fees and digital-first models.
Rise of Stablecoins and Crypto Payments
- Despite regulatory hurdles, crypto-enabled remittances are growing as a workaround for FX inefficiencies.
B2B Payments as the Next Frontier
- SMEs and trade finance remain underserved. Startups that streamline cross-border invoices and supplier payments could unlock billions in trapped capital.
What Needs to Happen Next?
The report ends with clear calls to action:
For Investors:
- Back infrastructure plays (PAPSS adoption, FX liquidity solutions).
- Bet on interoperability enablers rather than standalone fintech apps.
For Founders:
- Focus on SME payments and embedded finance (lending, insurance).
- Prioritize partnerships with mobile money providers for last-mile reach.
For Policymakers:
- Harmonize regulations — a single African KYC framework could slash compliance costs.
- Accelerate PAPSS adoption by mandating bank participation.
- Test blockchain settlements instead of blanket crypto bans.
The Bottom Line
Africa’s cross-border payments system is ripe for disruption, but progress depends on collaboration between fintechs, banks, and regulators. Without systemic fixes, high costs and inefficiencies will persist — holding back trade and financial inclusion across the continent.