Africa's cross-border payments boom: Why stablecoins and AI are key to the next financial leap

Finextra

3 days ago

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Remittances to Africa have hit record highs, but sky-high fees and inefficiencies in Africa's payments landscape still hold back economic potential. This article explains why stablecoins and AI could reshape cross-border payments and inclusion across the continent.
Africa is experiencing a cross-border payments boom, with data from the World Bank showing that remittance inflows into Africa soared to USD 95.3 billion in 2024, despite a rocky global economic environment. Countries like Egypt, Nigeria, and Morocco continue to receive billions annually from their diasporas. The individual transactions may be small – a few hundred grand sent to a parent in Johannesburg, with a few more sent to relatives elsewhere – but these small sums add up to billions across the continent, underpinning sectors like education and healthcare.
However, this lifeline is still marred by high transaction costs and settlement delays. Sending money into Africa has historically been expensive and slow. In 2023, the average cost of sending $200 into sub-Saharan Africa was 7.9% of the amount being sent – significantly higher than other regions like South Asia (5.8%) and Latin America and the Caribbean (5.9%). This is putting the brakes on economic development in the region, impacting both families dependent on remittances and small and medium-sized enterprises (SMEs), which suffer from delayed access to working capital.
But there is a new era of payments dawning. There are now big players entering the market to modernise the continent's financial infrastructure and transform the way that money moves across borders – both within Africa, and overseas. For instance, the new partnership between Yellow Card and Visa is a key example of where stablecoins are being used to radically improve the speed, cost, and security of cross-border transactions. This is critical in markets like Africa, where legacy systems continue to weigh down on the financial ecosystem.
Stablecoins – a financial transformation?
Stablecoins can be a reliable alternative to traditional remittance corridors, as they are linked to fiat currencies or to a commodity like gold. For instance, USDT and USDC are pegged to the US dollar, allowing users to transfer digital dollars quickly and with minimal volatility. Stablecoins can thus eliminate the need for complex foreign exchange conversions and costly intermediaries; instead of sourcing FX liquidity or relying on multiple correspondent banks, remitters can send funds in a stablecoin directly to recipients.
This minimises both settlement risk and delays, so, a payment that once took two or three days to process, can now be completed in minutes. What's more, as central banks continue to explore their own digital currencies, this innovation could become even more integrated into formal financial systems.
AI is key for Africa's payments future
Coupled with stablecoins, AI has the potential to unlock huge value and reshape Africa's payments landscape, notably by improving credit scoring, streamlining regulatory compliance, and generating behavioural insights.
While financial inclusion across the continent has been steadily rising for years, a significant proportion of the population is still underbanked.
In an environment where many Africans operate outside the traditional banking sector, mobile wallets and digital payment platforms can plug this gap and unlock a treasure trove of untapped data. AI tools can analyse this information to assess spending habits, repayment patterns, and risk profiles far more accurately than outdated, document-heavy processes reliant on payslips or formal credit histories.
For instance, imagine a user who receives their salary into a digital wallet, pays their utilities on time, and regularly shops locally using tap-to-pay. AI can interpret these behaviours as signs and evidence of financial reliability, which paves the way for micro-lending, insurance, or savings products tailored to their needs. AI can enable remittance providers to also track spending patterns more accurately, helping them to understand demand and design services that respond to real customer behaviour.
Plugging the infrastructure gap
That said, Africa's readiness to support this shift is mixed. While countries like Kenya and Nigeria have made strides with mobile money and fintech innovation, infrastructure and regulation remain major hurdles. Many African markets remain deeply reliant on cash, with limited access to point-of-sale terminals and mobile data. As the saying goes, 'cash is still king' – and that's a heavy barrier to progress.
To bring more users into digital ecosystems, the continent needs widespread infrastructure investment. This means improving mobile and internet access, especially in rural areas, and expanding access to smartphones. Other opportunities are in building digital identity systems that allow users to open wallets, verify transactions, and access formal banking services securely.
At the same time, governments and regulators must step up. In the UK and Europe, governments are proactively exploring digital currencies and setting out clear regulatory roadmaps. In Africa, however, regulators have generally adopted a wait-and-see approach, making movement in this space slow. To truly benefit from the promise of stablecoins and AI, governments and financial regulators across the continent should engage more closely with fintechs and central banks operating in the region. Policy harmonisation and cross-border regulatory alignment will be key to moving the needle in this area.
Accelerating inclusion and innovation
If these pieces come together, the benefits on Africa's payments ecosystem could be transformative. – bringing millions of unbanked individuals into formal finance. Ultimately, the biggest winners will be end-users. Consumers who previously waited days for cross-border transfers, paid excessive fees, or were denied access to credit will benefit from a faster, fairer, and more intelligent system that understands their needs and works in their favour.