Imagine this: a Kenyan SME just sold a container of textiles to a buyer in Ghana. The goods are packed, the truck is rolling, and the entrepreneur is ready to celebrate. But while the shipment might reach Accra in under a week, the payment could take two. And by the time the money arrives, it’s smaller thanks to fees, conversions, and mystery deductions no one warned them about.
Welcome to Africa’s fragmented payments infrastructure, where sending money across borders is often slower, costlier, and more unpredictable than moving the goods themselves. For SMEs, who live and die by cash flow, these bottlenecks are more than an annoyance, they’re existential.
So, what’s going on? Let’s unpack how fragmentation affects cost and speed, and why it matters for Africa’s cross-border growth.
The Fragmentation Problem
Africa’s payments ecosystem is a patchwork quilt stitched together with mismatched fabrics. Each country has its own systems, rules, and dominant players. Instead of one connected payments highway, we have dozens of toll roads, each demanding its fee.
Here’s what that looks like in practice:
Mobile money vs. banks – Safaricom’s M-Pesa doesn’t naturally talk to Ecobank, and Ecobank doesn’t automatically settle with MTN MoMo.
Country silos – Nigeria’s NIBSS instant payments don’t link directly with Kenya’s PesaLink.
No common switches – Payment switches often stop at national borders, forcing transactions to bounce through multiple intermediaries.
Result? Every time money crosses a border, it takes a detour through third parties, adding delays, costs, and complexity.
The Cost of Fragmentation
For SMEs, every extra hop in the payment chain is another hand in their pocket.
Multiple Intermediaries = Higher Fees
A payment from Nairobi to Lagos might pass through a local bank, a correspondent bank in Europe or the U.S., and another bank in Nigeria. Each takes a cut.Currency Conversions = Hidden Costs
Even when both countries use African currencies, many transfers are routed through USD. That means double conversion fees: shillings → dollars → naira.Lack of Transparency
SMEs often don’t know upfront what a transaction will cost. A $10,000 payment might land as $9,700 — with no clear explanation.Pricing Out Smaller Players
For corporates, a $300 fee is annoying. For an SME, it can wipe out their profit margin.
According to the World Bank, the average cost of sending money to Sub-Saharan Africa is still the highest globally — hovering around 8% per transaction.
That’s not just expensive — it’s punitive.
The Speed Penalty
Fragmentation doesn’t just drain wallets, it also slows everything down.
Correspondent Banking Delays
Payments routed via offshore banks can take days to settle. Some SMEs literally track payments like lost luggage.Batch Processing
In many countries, transfers are still processed in batches, not in real-time. A Friday payment might only clear on Monday.Verification Bottlenecks
With no unified KYC or compliance framework, checks get duplicated at each step. More paperwork, more waiting.
The result? SMEs lose valuable time. A delayed payment can mean:
Suppliers refusing to release goods.
Missed opportunities to restock.
Strained business relationships.
In fast-moving sectors like FMCG or agriculture exports, a three-day delay can make the difference between profit and loss.
Global Comparisons: What SMEs Are Missing
To see how much better it could be, look outside Africa:
India’s UPI – Real-time, interoperable, and nationwide. SMEs can move money instantly and cheaply.
EU’s SEPA – One system for 36 countries. Cross-border euro payments feel like domestic transfers.
U.S. FedNow – Launched in 2023, giving businesses real-time domestic settlement across banks.
Compared to these systems, Africa’s fragmentation looks like trying to run a marathon with your shoelaces tied together.
The Bigger Picture: Why It Hurts SMEs
SMEs aren’t just another segment of the economy — they’re Africa’s backbone, contributing around 80% of jobs and 50% of GDP. When payments infrastructure fails them, the whole economy feels it.
Working Capital Stress – SMEs can’t afford long settlement cycles. Delays choke liquidity.
Trade Barriers – High fees act like tariffs, undermining AfCFTA’s promise of free trade.
Competitive Disadvantage – While their peers in Asia or Europe enjoy instant, low-cost payments, African SMEs pay more and wait longer.
It’s like showing up to a Formula One race with a bicycle.
Who’s Trying to Fix It?
The good news: Africa isn’t standing still. A few initiatives are paving better roads:
PAPSS (Pan-African Payment and Settlement System): Allows payments in local currencies across borders, without detouring through USD. Early days, but huge potential.
Regional IPS Initiatives: Efforts to link instant payment systems across countries (e.g., discussions between SADC, EAC, and ECOWAS).
Mobile Money Interoperability Projects: Some operators are experimenting with cross-border MoMo transfers.
But adoption is slow, and trust is still building. Until these systems scale, fragmentation will keep taxing SMEs.
The Way Forward
Fixing fragmentation isn’t about building more systems. It’s about connecting the dots:
Interoperability between banks, mobile money, and fintechs.
Regional cooperation across IPS and switches.
Transparent pricing that SMEs can rely on.
Policy harmonization to reduce regulatory friction.
Because Africa doesn’t need more toll booths — it needs expressways.
Conclusion: SMEs Deserve Better
For SMEs, every transaction is lifeblood. Delays kill deals. Fees drain profits. Fragmentation is more than inefficiency — it’s a barrier to growth.
The future of Africa’s cross-border payments depends on building rails that are fast, affordable, and connected. Until then, SMEs will keep paying the highest price.
At Niobi, we believe payments shouldn’t feel like smuggling money across borders. Whether you’re a startup in Kampala or a trader in Dakar, you deserve rails that work as hard as you do.
Because in 2025 and beyond, the SMEs powering Africa’s growth can’t afford slow lanes. They need expressways.
