Solving X-Border challenges in Africa

For most consumers sending money overseas, peer-to-peer (P2P) payments are slow and expensive.

According to data collected by PYMNTS on cross-border remittances, of the 70% of consumers who pay fees to send money abroad, 41% pay a percentage fee of 6.2% on average, while 28% pay a flat fee averaging $14.80.

For US shippers alone, this represents a staggering cost of $3.5 billion. And even the 30% of respondents who said they don’t pay fees may be paying exchange fees.

Read more: The cross-border remittance report

Published in conjunction with the Stellar Development Foundation, the research also found another significant sticking point which is long payment terms. It takes on average more than two days for beneficiaries to access the funds.

This is particularly difficult because the highest percentage of P2P payments were sent to friends or family members in financial need due to the pandemic (32%), indicating that these long payment times and these high transaction fees can have a significant impact on recipients’ access to funds or on payers’ ability to send the total amounts originally planned.

Because of these hurdles, there’s no doubt that consumers are hungry for fast, secure and frictionless alternatives to moving funds across borders, and companies like Tanzanian FinTech NALA are rising to the challenge.

Starting with local money transfers, the cross-border payments company expanded to include international remittances last year, helping UK and US customers send money to recipients in six African countries: Tanzania, Kenya, Uganda, Rwanda, Ghana and South Africa. Africa.

In the past six months alone, over 8,000 customers have transferred tens of millions of dollars to Africa. This figure is expected to increase by the end of this year as the company plans to expand to six more African countries including Nigeria.

See more : Tanzanian payments fintech NALA raises $10m

To further spur its growth, the company announced in a LinkedIn post on Thursday (January 27th) that it had secured a $10 million seed funding round, the money that founder and CEO Benjamin Fernandes says will be used to develop its infrastructure.

“My view is that payments across the continent are built at 1%, and there’s a lot of infrastructure and software that needs to be built deep,” he said. “That’s where we want to sit and this round of $10 million is going to go a long way.”

In the meantime, the company has received license approvals to go live in the US and the EU, Fernandes added, noting that these locations “will go live in a month and a half in at least one more country. of the EU, probably France”.

African fintech company Chipper Cash is another venture seeking to fill gaps in the remittance space and facilitate money transfers across borders. The company closed an extended $150 million Series C funding round in November at a valuation of over $2 billion, bringing its total fundraising to $305 million.

Read also: African FinTech Chipper Cash Raises $150M at $2B Valuation

Co-founded in 2018, the payments company, which has over 4 million users, specializes in app-based, toll-free P2P cross-border payments and operates in seven African countries – Ghana, Kenya, Nigeria, Rwanda, Africa South, Tanzania and Uganda.

But it’s not just private companies looking to help solve the region’s remittance problem. This month, the African Export-Import Bank (Afreximbank) launched the Pan-African Payments and Settlement System (PAPSS), in collaboration with the African Union (AU) and the African Continental Free Trade Area ( AfCFTA).

See more : Afreximbank’s payment system goes live with 12 African banks

As reported by PYMNTS, the system is expected to boost cross-border transactions across Africa, saving businesses and households in the region around $5 billion in annual transaction costs.

“PAPSS provides the state-of-the-art financial market infrastructure connecting African markets to each other, enabling instant cross-border payments in the respective local African currencies for cross-border trade,” said Afreximbank Chairman and President, Benedict Oramah , when launched. event in Accra, Ghana.

Read also: Repairing regulatory fragmentation will boost cross-border payments across Africa

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NEW PYMNTS DATA: 70% OF BNPL USERS USE BANK PAYMENT OPTIONS, IF AVAILABLE

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