Cross-border payments are an integral part of day-to-day operations for individuals and businesses in Africa, but transferring funds across the 54 countries in the region is not without its challenges.
“I’m calling in from Ghana, and I still don’t understand why it is so complicated to send money to Nigeria or to the Benin republic,” Dare Okoudjou, founder and CEO of MFS Africa, told PYMNTS in a recent interview.
The company, Africa’s leading digital payments gateway, announced earlier this year that it had reached more than 320 million mobile money wallets, covering an estimated 60% of all wallets in sub-Saharan Africa.
Clearly, there is still more ground to cover, Okoudjou said — but the fact that the company came up with an idea in one country and sold it to more than 320 million people is a clear indication that the issue is not the fragmentation of markets.
Rather, what is hindering cross-border payments is regulatory fragmentation — primarily caused by the lack of trust between governments and central banks in the region. Until that is resolved, Okoudjou said, transfers will keep moving through U.S. dollars or the euro, which require more stringent processes in terms of enhanced screening and due diligence for politically exposed persons (PEPs) — all merchants and agents are screened against commercial databases of PEPs to identify them. These are done for transactions sometimes as little as $20, he noted.
Okoudjou is optimistic that the ongoing implementation of the Pan African Payment Settlement System (PAPSS) will facilitate instant, cheaper and seamless cross-border payments in local currencies, bridging differences between central banks — particularly how they look at risks, markets and transactions.
Expanding to New Horizons
Launched in 2009 to facilitate peer-to-peer transactions, MFS Africa recently raised $100 million to accelerate its growth on the continent and internationally. Nigeria, Africa’s largest economy, is a key focus moving forward.
According to Okoudjou, penetrating the West African market has been a long time coming — but here again, regulatory setbacks played a central role in that delay.
It was only earlier this month that major telecommunications networks MTN and Airtel Africa received conditional approval to operate mobile money services in Nigeria for the first time, marking the initial step toward obtaining final licenses from the country’s central bank, which will allow the providers to offer remittance services and accept deposits, among other services.
“Those [licenses] have been our natural ways of entering any country,” Okoudjou said, explaining why the company had to eventually turn to an agent network as an alternative, acquiring the Nigerian FinTech company Baxi, which runs a network of small and medium-sized businesses (SMBs) operating as agents.
Using these mobile money agents is not necessarily a lesser option, he noted, adding that their ability to digitize cash by offering cash-in, cash-out services in areas where ATMs and bank branches are nonexistent makes them “the real giants on which mobile money stands.”
Okoudjou is also optimistic about the firm’s partnership with the PayPal service Xoom, which is helping to connect the African diaspora in Europe, the U.K., Canada and the U.S. with mobile wallets on the continents. That collaboration has exceeded his expectations, expanding from its initial five payment corridors to 20 today.
Okoudjou added that MFS Africa has replicated the partnership with several others over the last few months, including London-based startup PaySend and Sweden-based, East-Africa-focused FinTech Transfer Galaxy.
Beyond Africa, the payments firm has its sights on China, following requests from SMB clients looking for ways to facilitate payments to the Asian country, which is Africa’s largest trading partner.
“A lot of people don’t realize how difficult it is for many countries to [transfer money to China],” Okoudjou explained, adding that sometimes payments end up in suspect accounts in the country, resulting in a breakdown of trust between the African trader making the payment and the Chinese exporter receiving the payment.
But as much as the China-Africa corridor holds huge potential for growth, he said the company’s focus will remain on “wiring up Africa” and on the milestones they want to achieve: reaching all 54 African countries, hitting 500 million mobile money users and onboarding over a million SMBs across the continent.
The Mobile Wallets-Cryptocurrency Link
Data gathered in a recent PYMNTS report on cross-border remittances revealed that in the wake of the pandemic, consumers’ need for cheaper and more convenient alternatives led them to turn to virtual currencies. The research further revealed that those who now use cryptocurrency to send cross-border remittances are frequent adopters of innovative payment methods like mobile wallets, given the convenience of instant contactless payments and the speedy transfer service they provide.
On the link between mobile wallets and cryptocurrency, Okoudjou said it is more obvious in countries like Nigeria and Zimbabwe, where regulation makes it difficult for people to move money. He added that most innovations like blockchain technology are “overestimated in the short term and underestimated in the long term.”
As a result, Okoudjou remains cautious about MFS Africa’s potential to streamline cross-border payments but added that “I do think the next five years will bring us more clarity and insight as we move into the underestimation phase, where the possibilities will be much bigger than what we can imagine.”
MFS Africa is actively performing its own research and development to understand the possibilities in advancing cross-border payments. Even though they currently don’t trade in cryptocurrency, clients in markets where trading is authorized by the regulation can use mobile money as an on-ramp, off-ramp for transfers into cryptocurrency wallets, Okoudjou said.
And with those new possibilities, he’s hopeful that cross-border payments will spread widely, to a point where it is “something that we come to take for granted,” with MFS Africa playing “a key role in making that happen.”