Digital payments have grown immensely over the past few years, especially during the pandemic lockdown. Many businesses moved their transactions online. 

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In Nigeria, for example, digital transactions doubled to about 800 million in 2020, according to the Central Bank of Nigeria. With this evolution, transactions became faster and more efficient for African businesses. 

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The best part? Businesses aren’t restricted to just customers in their region. They reach global markets, which in turn boosts their returns, leading to a more connected and competitive economy. 

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However, challenges still abound for many African businesses. Some struggle with high transaction fees, exchange rate fluctuations, concerns about fraud and cybersecurity, and many more. 

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But these challenges are only pathways for growth. What matters as a business is that you’re willing to open your doors and adapt. 

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This guide explains not just the barriers but also how to overcome them and scale your business. 

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High transaction fees

This is a common challenge. For every transaction made, businesses pay fees to payment gateways, banks, or mobile money providers. Over time, these charges add up and can reduce overall earnings, especially for small businesses. 

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Cross-border payments are even more challenging because exchange rates are always fluctuating. Also, payments may pass through multiple banks or processors, and each intermediary can charge its own fees. 

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All these make international transactions more expensive.

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To reduce heavy transaction fees:

1. Partner with an all-in-one payment platform

This means accepting, managing, and sending payments from a single platform. Instead of using different tools for different payment tasks, everything is handled in one place.

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Kora is a good example. 

The platform allows businesses to accept payments in different currencies from cards, bank transfers, virtual bank accounts, EFTs, and mobile money through a single integration. This reduces the need to integrate multiple payment systems, which lowers technical, maintenance, and administrative costs.

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2. Implement automated systems

Kora allows businesses to withdraw funds or send payouts directly from their dashboard or through the Payout API.  Businesses also get complete payout histories, instant update notifications, and downloaded transaction reports.

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With such a streamlined process, operational costs and unnecessary transaction fees are avoided. It also helps reduce errors associated with manual payments.

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Delay in processing the transaction

This happens mostly in cross-border transactions. Sometimes, it can take several days to complete. Why is this so?

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Many payment providers still rely on outdated banking systems that require multiple steps and verifications before funds reach you. The payment passes through intermediaries such as banks, payment processors, and foreign exchange providers.

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Imagine selling goods to a customer in another country and having to wait several days for payment to arrive. You’ll struggle to pay suppliers, restock products, or pay employees on time. That’s a lot of headaches to deal with. 

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Create and share payment links to fast-track transactions

With a payment link, you can receive payments without coding or API integration. The link is embedded on websites, apps, or social media pages. Once the customers open it on any device, they can complete their payment instantly.

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It also helps if the links serve different purposes like online sales, subscriptions, loan repayments, or donations. This fast-tracks the payment process.

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How to create a payment link with Kora:

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Lack of awareness and trust 

Some people aren’t fully familiar with how digital payment systems work, hence they are hesitant to use them for important financial transactions.

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Additionally, many users worry about cyber threats like phishing, hacking, SIM swap fraud, and data breaches. Take, for example, the Nigeria Inter-Bank Settlement System (NIBSS), which reported a total fraud loss of #17.67 billion. Half of these cases happened on digital payment platforms. Incidents like this discourage people, sending them right back to cash payments. 

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Add this to digital payments involving multiple intermediaries with hidden fees, especially in cross-border transactions. The process becomes less transparent, and businesses struggle to track their payments or understand exact fees and processing times. 

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How to enhance transparency and strengthen security:

Businesses can take the following steps to make digital transactions more secure:

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1. Choose partners with strong encryption

First, businesses should work with payment providers that use strong encryption to protect data during transactions. Encryption keeps important information like payment details and personal data safe while it’s sent online.

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2. Verify customer identity

Kora provides Identity APIs that help businesses verify their customers before processing transactions. For example, a telecommunication company can confirm subscriber details during SIM registration. 

These checks whether KYC (Know Your Customer) or KYB (Know Your Business) happen in real time. This reduces fraud and ensures that only real customers use the service. 

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3. Train staff on security practices

Employees also play an important role in securing digital payments. Businesses should train their staff on basic security practices, such as recognizing phishing emails, protecting login details, and handling customer data carefully.

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Restrictive government policies and regulations

In some countries, regulations have not kept up with new financial technologies. So, it’s harder for digital payment companies to operate and innovate. Also, when rules are unclear or too strict, investors and startups may hesitate to develop new payment solutions.

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Another challenge is the taxation of mobile money transactions. Countries like Tanzania and Uganda have introduced taxes on digital transfers to generate more revenue. While this helps governments raise funds, digital payments become more expensive for users.

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Maneuvering restrictive policies and regulations

A smart way for Africa business to follow government rules while accepting payment smoothly is to create virtual bank accounts. 

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Businesses can have separate accounts for local and international payments. That way, they receive money from abroad without complicated approvals or constant currency conversions while still complying with banking and government policies. 

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With Kora, every payment is linked to a customer, and funds are separated by type or source. This helps businesses calculate taxes faster and prove their transactions if needed. Everything stays transparent. 

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Upcoming initiatives like the Payment Service Directive for Africa (PSDA) also offer a way forward for businesses to maneuver restrictive policies. The goal is to harmonize payment regulations across Africa and fast-track cross-border payments, particularly for individuals and small businesses (MSMEs). 

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Businesses can prepare by choosing payment platforms that already support multiple currencies and cross-border transactions.

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Limited internet and power connectivity

Digital payment systems rely on the internet and power to work properly. However, internet penetration remains relatively low across the continent. 

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In fact, in about 36 African countries, less than half of the population has reliable internet. This means many people cannot easily use e-wallets, online banking, or mobile payment apps.

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At the same time, frequent power outages can interrupt payment systems, making it hard for businesses to complete transactions smoothly.

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How to scale through poor internet and power

1. Adopt USSD payment systems

They work with short codes dialed on a phone, for example, *123#. Since this service does not require internet access, it’s useful for customers in rural areas or places with poor connectivity.

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2. Implement mobile money services

A good example is VeryPay. Its POS devices can process payments even without an internet connection. The card balance is stored safely on the chip, so transactions happen instantly. Businesses can accept payments during the day and only connect to the internet later to update the records. 

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In Conclusion

Indeed, digital payments have opened many doors for African businesses. They make transactions faster, help businesses reach customers beyond their local markets, and create new growth opportunities. 

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You’ve seen the challenges that abound, but the good thing is they can be managed with the right tools and strategies. Platforms like Kora help businesses simplify payments, improve transparency, and process transactions more efficiently.

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As the digital economy continues to grow across Africa, businesses that embrace secure and flexible payment solutions will be better positioned to scale.

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