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The Nairobian

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How fintech firms are helping SMEs trade across borders

Enterprise

By Apollo James | Jan 29, 2025

We live in an era where many African businesses are establishing their presence online as many of their customers now have access to smartphones, social media platforms and high-speed internet.

An online presence also empowers them to access international markets as well as perform easier and faster financial transactions, fostering a sense of connection and loyalty.

Many businesses are now adopting various technological solutions to improve and grow their businesses.

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Leading the way is the underserved market of Africa – a continent bustling with entrepreneurial spirit and economic potential.

But with this energy comes significant challenges, especially when it comes to cross-border payments, a crucial aspect of doing business in today’s global economy.

Significant hurdles

For decades, cross-border payments have long faced significant hurdles for entrepreneurs across Africa with Kenya being no exception.

To trade with partners in other African countries, they often need to convert the Kenyan Shilling into dollars, which adds exorbitant costs and complexities.

This is true for 92 per cent of intra-African trade. Inefficiencies not only have serious consequences at a country level but across the whole continent.

Despite a booming population, Africa trades more with the rest of the world than within itself, with investment into the continent falling significantly short of projections due to perceived risks.

For owners of local SMEs, which account for over 40 per cent of Kenya’s gross domestic product, this is placing huge restrictions on their capacity to emerge as a true engine of growth for the economy.

For the last five to 10 years, cross-border payments in Africa have significantly grown at about 20 per cent annually. This is not just cross-border payments out of Africa but intra-Africa trade too.

This is portrayed by the African governments signing the free trade continental agreement that is trying to enhance that growth.

Cross-border payments in Africa however, have long been fraught with complications like high costs, opaque pricing structures, and sluggish transaction times.

For African businesses keen on expanding beyond their native shores, these barriers have been daunting and often stifle business growth.

Conversely, Western companies seeking to tap into Africa’s burgeoning markets often face the same obstacles, making it a double-edged sword.

Kevin Ng’ang’a, country manager for Verto, a global fintech specialising in cross-border payments, says small and medium enterprises (SMEs) need to be provided with solutions that address the lack of liquidity, high transaction fees, and long settlement times associated with cross-border payments.

“Through smart technology and a deep understanding of the African market’s nuances, these issues can be systematically tackled to streamline cross-border payments for both African and Western businesses,” he said.

Some of the challenges facing cross-border payments in Africa like trapped cash, force multinational companies to face significant obstacles in repatriating funds due to currency restrictions and local exchange controls, hindering their operations and potentially leading to exits from the continent.

There are also limited intra-African payment solutions. The high number of intra-African migrants compared to those leaving for traditional destinations highlights the need for seamless cross-border payment solutions to support this growing trend.

The inability to directly use local currencies for cross-border transactions forces businesses to rely on the US dollar, adding unnecessary complexity and cost - primarily due to a lack of interoperability between African currencies.

Traditional international payment systems are also expensive and time-consuming, especially in emerging markets like Africa where local currencies lack liquidity compared to developed economies.

While innovative fintech solutions exist for consumer payments and remittances, the B2B market, a significant driver of global trade and employment, remains largely unaddressed.

According to Ng'ang'a, financial technology firms are at the forefront of solving these liquidity and interoperability challenges.

“We enable businesses of all sizes to access enterprise-grade cross-border payments, FX and banking solutions via advanced platform or API,” he said.

Their platform uses purposefully built tech infrastructure and payment rails that allow businesses to make seamless cross-border payments, eliminating the need for dollar conversions.

“We’re helping businesses unlock Africa's growth potential. Our solution will help an African business to scale across borders," he added.

This transformative approach to cross-border payments is already helping businesses to flourish in this new financial frontier -

From small startups in Nairobi seeking to source raw materials from across the globe, to established Western corporations keen on unlocking Africa’s promising markets, the easing of financial transactions remains a key challenge.

Businesses that offer fintech solutions like Verto are reshaping the landscape of cross-border payments.

They are not just facilitating commerce – they are also helping to unlock the immense potential of emerging Africa, accelerating its journey towards economic prosperity.

Revolutionising businesses in Africa is inevitable because there exists the power of innovation to overcome traditionally rigid financial barriers.