UK businesses can tackle African cross-border payment challenges

Driven by booming sectors such as technology, agriculture, and natural resources, Africa is attracting increasing attention. The continent presents a particularly compelling opportunity for UK companies looking to expand in a post-Brexit world.

Yet, despite Africa’s rising economic profile, the complexities of cross-border payments remain a significant hurdle. While the continent races ahead in many areas, its financial infrastructure lags, creating challenges for businesses transacting across borders.

Why Africa is the new frontier

The rapid growth of Africa’s emerging economies is strengthening its appeal as a key trade destination. Countries like Nigeria, Kenya, and South Africa are driving investment across sectors, supported by young, tech-savvy populations powering consumer demand. With over 60% of the continent’s population under 25 and digital adoption rising, the conditions for innovation and scalable growth are rapidly evolving.

This shift presents a golden opportunity for UK companies looking to extend their international reach. Moreover, in the post-Brexit era, new bilateral trade frameworks such as the UK-Kenya Economic Partnership Agreement (EPA) have paved the way for stronger UK-Africa relations, increasing commercial engagement.

However, Africa’s financial landscape differs significantly from other regions and cross-border payments are central to Africa’s growing trade relationship with the UK. Efficient systems are essential for market entry and long-term success.

Cross-border payment challenges

Despite strong growth potential, financial transactions between the UK and African countries remain complicated by several factors. These include currency volatility, limited banking infrastructure, regulatory complexity, and high transaction costs.

Currency volatility

Political and economic fluctuations in key markets can lead to sudden fluctuations in exchange rates, increasing transaction costs and risks exposure for UK companies.

Limited banking infrastructure

Uneven access to traditional banking services across regions can result in payment delays and inefficiencies.

Regulatory complexity

Varying compliance frameworks, including Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, require businesses to navigate different standards across multiple jurisdictions.

High transaction costs

Traditional banks often impose steep fees for international transfers, while opaque pricing adds unpredictability to financial planning.

This can disrupt cash flow and impact profitability, particularly with SMEs, with reports showing that over a third (36%) of payments received in an average month are late. However, the rapid expansion of fintech solutions is transforming payments, offering businesses new ways to navigate these challenges more effectively.

Strategic approaches for seamless transactions

If businesses are looking to scale operations across multiple African countries, they need to partner with the right banking infrastructure and pick a payments platform that works for them.

A beneficial approach is leveraging multi-currency accounts, allowing companies to hold funds in various African and global currencies, effectively hedging against foreign exchange volatility. Provided they have the right payments provider that is compliant with local regulations, businesses can also open local bank accounts and collect funds in the local currency. Exchange fees and delays can become a thing of the past.

To enable operational efficiency at scale, UK companies should consider integrating API-based solutions into payment workflows. This automation streamlines transaction volumes and reduces manual errors and processing times.

Additionally, compliance automation tools, such as automated KYC and AML verification, helps simplify regulatory requirements across African fragmented financial landscape.

When selecting payment partners, finance teams should prioritise vendors with clear fee structures, robust API capabilities and strong security measures. Platforms regulated by UK financial authorities can help ensure compliance and reliability in cross-border transactions.

The gateway to success

While Africa offers immense growth opportunities, the complexities of cross-border payments should not get in the way of your businesses’ success. Fintech innovation is integral to these efforts, providing efficient, secure, and cost-effective solutions for businesses operating in emerging markets.

By adopting the right financial tools and payment strategies, UK businesses can confidently navigate Africa’s evolving financial ecosystem, unlocking long-term growth.