Financial Inclusion: Policy fragmentation, dollar dependence stall cross-border payments in Africa

Cross-border payments across Africa remain a significant financial hurdle, with transfer costs soaring as high as 7.9% for a $200 transaction. This expense far surpasses the United Nations' Sustainable Development Goal target of 3%, hindering financial inclusion and economic integration on the continent.

Experts point to a complex web of challenges, including fragmented regulations, inconsistent policies across nations, and a persistent dependence on the US dollar, as primary reasons for the inefficiency. These factors collectively slow down efforts to create seamless and affordable payment systems, despite the continent's progress in developing instant payment solutions.

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Retail digital cross-border payments are essential for Africa’s economic future because they unlock opportunities for financial inclusion, economic integration and sustainable growth across the continent.

Sabina Mensah, deputy chief executive officer of the AfricaNenda Foundation, highlighted the critical need for affordable and reliable retail digital cross-border payments for Africa's economic future. She noted that a lack of regulatory certainty, fragmented digital financial services policies, and limited cross-border provider licenses are key barriers.

In response, African central banks are intensifying efforts to harmonize policies. The Association of African Central Banks (AACB) adopted Resolution 21, tasking its Payment System Integration Task Force with leading continent-wide harmonization. This initiative aims to align policies on licensing, foreign exchange controls, and know-your-customer requirements, crucial steps toward connecting Africa's payment systems and reducing transaction costs.

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Yet today, the key barriers include a lack of regulatory certainty, fragmented digital financial services policies and regulations, and limited cross-border financial services provider licences.