Scaling access to new African markets through payments infrastructure

A company’s sustainability is linked to its ability to unlock new markets. One of the simplest ways to do that is by entering new territories.

But making one’s products and services available in a new African country doesn’t necessarily mean a physical office - with the associated costs. A company can simply broaden its ability to collect payments for a ubiquitous digital service. 

These companies can thus scale their existing services into new African markets by capitalising on the ability to collect payments virtually, without worrying about building a payments infrastructure or platform of their own.

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The gap  

The opportunity for growth is enormous. E-commerce is growing, albeit off a low base. By some calculations, online sales make up less than  1% of retail sales on the African continent. But the sector is blossoming, with more and more Africans purchasing goods and services directly from regional and global suppliers. 

Africa’s more than 1 billion consumers are in ever greater need of digital services and financial technology platforms. Key needs include content streaming, making cross border payments and sending money back home to relatives and friends. 

Africa’s booming mobile money services twinned with informal businesses coming online presents an opportunity for the expansion of online sales into newer markets across the continent.

Evidence of this can be found in the emerging Fintech industry, with 564 startups across the continent raising a record $2 billion in 2021. Nigeria has become a shining example for the continent, having raised $1 billion in 2021. Their fintech ecosystem brought in 73.5% of all of the funds raised by startups in Africa’s most populous country.  Although, this kind of funding doesn’t tell the full story.

Companies don’t need to make large financial outlays to set up physical offices or a cross-border payments system to grab hold of these opportunities. Businesses can expand into new territories with a simple financial presence and the right payment partner. 

Think: duplicating your service from one market to another, and just putting in place the right payment infrastructure. 

A robust fintech solution should do the heavy lifting for clients by solving their revenue collection and payments challenges, reducing operational costs and leaving these companies free to focus on what they are best at: their core operations.

Businesses simply need to partner with companies that have the necessary digital payments and transacting infrastructure in place and capitalise on their switches and platforms to reach newer markets.

Mobile money

On a continent like Africa where mainstream banking services are few and far between, mobile money must form part of a company’s payment options. Mobile payments and mobile wallets are becoming integral to Africa’s payments ecosystem; for example, in Kenya, a recent central bank survey found that mobile wallets account for about 32% of all remittance receipts. Companies looking to cross borders with their services must then integrate mobile wallets into their transacting and payments platforms. 

The market in Africa has a very promising future, with predictions showing that it is set to grow by 22.2% between 2022 and 2028, having already doubled between 2017 and 2021.

But given the red tape to obtain the necessary permits and approvals from each country’s regulators, hacking together a cross border payment system on their own should be the last thing that a company should be doing to build scale. They don’t need the additional hassles of navigating various bureaucracies, high costs and creating niche expertise. 

Instead, getting the right payment partner in place is necessary. Such a partner will help potential customers using mobile money plug into a pan-Africa cross border payment system to purchase your services and products - even if they have low or no-tech access. 

This means working with a payment provider that has invested in last-mile fintech infrastructures such as cash-in cash-out platforms, point of sale, mobile wallet interoperability and the necessary enabling agent networks. Not everyone has a smartphone in Africa, after all. This is exemplified by the 91%, 80%, and 79% mobile phone ownership rates in South Africa, Ghana, and Senegal respectively – although the corresponding values for smartphone ownership are 51%, 34%, and 46%, respectively. You don’t want to lose a potential customer because you don’t have the means for them to pay you. Many mobile wallets are based on the USSD feature phone function offering easy access to potential customers. 

There are companies in Africa that have focused on building and developing fintech and digital payments infrastructure to lessen the burden of the continent’s digital businesses investing in physical offices and own cross border payments capabilities. After all, Africa is vast and each market is unique. This means that you need a cross-border payments company that understands the payments ecosystem in each country, banding these together under one switch. 

African Free Trade 

And there’s never been a better time to expand a company’s services across the continent than now. 

The Africa Continental Free Trade Area (AfCFTA) presents an opportune moment for companies looking to expand to new markets. Making up one of the world’s largest trading blocks by areas and boasting over 1 billion consumers, AfCFTA and its payment mechanism, the Pan African Payment Settlement System, are premised on making cross-border transactions seamless. It’s also determined to save the continent $5 billion in fees from financial transactions that have typically flowed off-shore historically. 

Platforms such as PAPSS, which is backed by a $3 billion settlement guarantee from Afreximbank, will enable companies to scale their offerings to new markets by accepting payments from customers regardless of location - and catering to entrepreneurs, SMEs and traders.

Companies interested in expanding to new African markets must meet the opportunity presented by 

AfCFTA and PAPSS. The nature of Africa’s historical financial sector architecture favours legacy banks that are limited in terms of geographical coverage, imposing gaps in reach and limitations on accessibility. Fintech offers the cross-border payments mechanism that will make the dream of AfCFTA a reality in a continent where huge swathes of the population and many merchants do not have access to formal banking. 

The most unbanked countries in Africa are Morocco, Egypt, and Nigeria, with 36.9 million (71%), 102.3 million (69%), and 206.1 million (60%) people being excluded from formal financial services, respectively. Internet penetration in these countries stands at 62%, 45%, and 70%, presenting an opportunity to open access to large swathes of the population.

A lack of financial infrastructure, poor integration of platforms and regulatory hurdles have previously inhibited interoperability and the cross-border payments innovations that are key for scaling access across Africa. For instance, remittances are quite important to African countries, yet the cost of sending money between African countries remains high. In Ghana, for example, the average cost of sending remittances was 7.43% in 2020. In Kenya, that was 8.45%, in Malawi, it was 16.26%, and in South Africa, it was 8.14%. Billions are being lost to transaction costs and Fintech solutions for cross-border payments can significantly reduce the money lost to legacy financial institutions.

But that’s finally starting to change, presenting an incredible opportunity to companies looking to scale access. Fintech companies such as MFS Africa have been solving cross-border payments challenges on the continent for years, boosting the ability of African businesses and individuals to send and receive money across barriers in the form of borders. 

Our recent acquisition of cash-in cash-out operator Baxi in Nigeria demonstrates our commitment to including last-mile users with limited tech access into our payment network. 

And regulators have been coming to the party too. Central banks from Kenya, Namibia, and even Zimbabwe have been bumping up their regulatory preparedness to embrace e-commerce, fintech and digital payments.

This together with the cross-border payment system moves being made by PAPSS has created a zeitgeist of intra-African access. It would be a tragedy to be left behind as a company. To take advantage of the moment, you need the right partner. 

Our solution

MFS African has already integrated into PAPSS and is primed to provide greater access to other fintech, e-commerce, finance institutions and mobile wallets to reach the entire continent.

Mobile wallets can be harnessed to power-up cross border remittances and to process payments by companies for supplies or stock.

MFS Africa provides access through its cross-border payment switch that connects 320 million mobile wallets across 30 African markets. We operate across more than 600 payment corridors on the continent, making cross border payments seamless and remittances ubiquitous. SMEs, merchants, mobile companies and financial institutions also have the chance to scale up access across the continent by partnering with MFS Africa, and our ready presence in much of the continent.

For us at MFS Africa, there should be no barrier to selling services from one African country to the other. The key is to have a payment partner