Africa is building faster cross-border payment systems, but the availability of local currencies is a major challenge. The Pan-African Payment and Settlement System and Kenya's Pesalink have connected over 160 banks, enabling 24/7 cross-border payments in local currencies. However, the lack of liquidity in certain currencies hinders the speed and cost-effectiveness of these transactions. This issue affects not only intra-African payments but also transactions between Africa and other regions, such as Asia.
Mobile money has revolutionized digital payments in Africa, with over 2.3 billion registered accounts and 593 million active users on a 30-day basis globally. Africa, excluding North Africa, accounted for more than two-thirds of the growth in registered accounts. However, cross-border payments remain a significant problem, with Africa recording the highest regional average remittance costs, around 6% globally. The World Bank reports that remittance costs have fallen, but the continent still faces challenges in this area.
Stablecoins have emerged as a potential solution to ease liquidity pressures in cross-border payments. Their global market capitalization reached approximately $320 billion by the end of May. However, the Bank for International Settlements notes that their use in real-economy payments remains modest, and their performance across borders can vary significantly once fees, foreign exchange spreads, and on- and off-ramp costs are included.
Raj Kamal, founder and CEO of TransFi, a payments infrastructure business covering over 70 countries, 250 payment methods, and 40 currencies, discusses the challenges and opportunities in Africa's payments landscape. TransFi projects around $5 billion in transaction volume for FY26 and uses stablecoins alongside local payment rails. Kamal highlights Africa's innovation in payments, citing the mobile money revolution and the Pan-African Payment and Settlement System as examples.
According to Kamal, Africa is genuinely ahead in payments, particularly in mobile money and financial inclusion. However, the continent still needs to improve liquidity and deepen financial inclusion. TransFi covers several countries in sub-Saharan and West Africa, including Kenya, Ghana, Zambia, Uganda, and Tanzania, and recently expanded to Angola. Africa currently accounts for around 10% of TransFi's total volumes, but it is one of the fastest-growing parts of the business.
Kamal notes that freelancer payments and cross-border payroll processing are significant opportunities in Africa, with a large volume of technology talent providing services to the rest of the world. The scale of payments between Africa and Asia, particularly B2B payments to China, is substantial. However, cross-border payments in Africa often slow down or become expensive due to liquidity bottlenecks, especially when settling between certain currency pairs or making payments to markets like China.
The bottleneck in cross-border payments lies in the liquidity side, with FX liquidity and FX spreads posing significant challenges. Even within Africa, settling between certain currency pairs, such as the Nigerian naira and the Kenyan shilling, can be problematic. TransFi's use of stablecoins for transfers helps mitigate these challenges, but the availability of liquidity in real-time and the spread needed to keep costs down become major concerns when dealing with large volumes.
Key points
- Africa's cross-border payments face a local currency bottleneck despite advances in payment systems.
- Mobile money has driven financial inclusion and payments in Africa, but cross-border payments remain a challenge.
- Stablecoins may help ease liquidity pressures in cross-border payments, but their use and performance vary.
