One of the biggest challenges facing the cross-border payments system globally is speed, cost, transparency, and inclusion, according to the Financial Stability Board.
While innovations are increasing to ease these challenges, cross-border payment in developing nations remains highly problematic. In Uganda, a World Bank report shows that it cost 23% of the amount being transfered, so to send $200 from Tanzania to Uganda, the sender would need to pay up to $46 in fees, even though both countries are neighbours.
With African fintechs nearing $4 billion in investment by the end of 2022 per an UNCTAD report, the barriers to payment interconnectedness need to be eliminated to drive inclusive and impactful business growth for wholesale, retail, and SME businesses in Africa.
This week, Flutterwave announced that it had secured a Switching and Processing Licensing from the Central Bank of Nigeria (CBN), which would enable transactions between banks, fintechs and other financial institutions.
Before now, the fintech company operated with the Payments Services Solutions Provider (PSSP) and International Money Transfer Operator (IMTO) licenses. What this means is that, the company would begin processing payments directly with less reliance on cumbersome payment networks. It would also allow Flutterwave to process card transactions, participate in agency banking and offer various payment services without any intermediaries.
This is a significant stride for the African fintech ecosystem, since it would bolster faster payments, lower the costs, yield improved customer experience, foster launching more innovative products, advance risk and fraud-free cross-border payments in its markets, and other payment barriers that are facing fintechs on the continent.
What is more? Achieving frictionless payment systems in Africa will increase foreign remittances, attract investors, sustain ease of doing business, and be a plus to the possibility of the African Continental Free Trade Area (AfCFTA) operations, an overall strategy to drive Africa's prosperity.
Why not continue reading The Draft to see other top stories that we tracked this week, including a Kenya-based fintech enabling access to working capital for small and micro-scale businesses and women entrepreneurs in Africa; an Indian consumer lending startup; a fantasy football esports startup planning expansion in Latin America; and a Saudi Aramco-led round into a 5G satellite operator company based in Luxembourg.
To a painless payment ecosystem!