Bridging the Divide: Challenges and Opportunities that come with Payment Fragmentation across Africa

Kotani Pay
5 min readJan 23, 2024


For a long time, cash has been the preferred payment method across Africa. Cash payments account for more than 50% of Point of Sales (POS) in Africa and the Middle East. Regardless of its supremacy, the COVID-19 pandemic drove a global surge for alternative digital payment, especially for e-commerce platforms. A demand that according to Mckinsey report, will not only endure but will accelerate by at least 30% per year through 2025.

A fragmented payment Landscape across Africa

Digital payment solutions are highly dependent on factors such as the proliferation of mobile devices, financial inclusion, and the push for digital transformation.

Mobile money can trace its roots back to Kenya through Mpesa. Since its launch in 2007, adoption of the digital payment method has only grown year after year, especially with a mobile penetration rate of 64% in the country. Mpesa’s success story further encouraged neighboring countries in the region to adopt the cashless system, increasing the uptake of mobile money across the East Africa region.

Courtesy of GSMA, 2023

In South Africa, credit cards make up 41% of payments online with bank transfers making up 20% and E-wallets 17%. The mass adoption of e-payments in the country can be credited to the well-developed financial infrastructure that supports electronic transactions, including card payments. The country boasts of a robust banking system and modern payment processing capabilities that encourage digital payments consumption.

The same cannot be said for West Africa where there is limited access to traditional banking services making cash the most preferred method of payment, especially in areas such as rural Nigeria.

The COVID-19 pandemic drove more people to rely less on cash and more on mobile money. The uptake of mobile money during and after the pandemic grew and surpassed East Africa with the most mobile money users across sub-saharan Africa. But with a population of over 420 million people in the region, the payment system is already fragmented with Countries such as Ghana preferring mobile money platforms and Nigeria debit cards.

Challenges that come with a fragmented payment system

A fragmented payment system poses multifaceted challenges that impact businesses, consumers, and the overall economic landscape. Some of these challenges include:

1. Interoperability Issues

Different payment methods and platforms may operate in isolation, making it difficult for users to transfer funds or conduct transactions across various systems seamlessly. This lack of interoperability can hinder the growth of cross-border trade and limit the effectiveness of regional economic integration.

2. Complexity for Businesses

Businesses operating in regions with fragmented payment systems face increased complexity in managing transactions. They may need to adapt their payment processes to accommodate various methods, leading to additional costs and logistical challenges. This complexity can be particularly burdensome for small and medium-sized enterprises (SMEs) that may lack the resources to navigate diverse payment ecosystems.

3. Regulatory Challenges

Regulatory frameworks that govern payment systems may vary widely across different jurisdictions. In a fragmented landscape, businesses must navigate diverse regulatory requirements, leading to compliance challenges which can be a long and expensive process. Harmonizing regulations is essential to create a conducive environment for innovation and to ensure fair and secure financial transactions.

4. Inefficient Cross-Border Transactions

In the absence of a standardized and interoperable system, cross-border transactions become cumbersome. The need for currency conversion, varying regulations, and different payment infrastructures can slow down the process and increase transaction costs. This inefficiency is a barrier to international trade and economic cooperation.

5. Limited Access to Financial Services

Payment fragmentation often correlates with disparities in financial inclusion. In regions where traditional banking systems coexist with mobile money or informal financial services, a significant portion of the population may remain unbanked or underbanked. Limited access to formal financial services hampers economic development by excluding individuals and businesses from the benefits of modern financial systems.

A Kenyan accesses financial services using mobile money

While a fragmented payment system brings challenges, it also presents various opportunities for innovation, growth, and financial inclusion. Understanding and capitalizing on these opportunities can lead to the development of diverse solutions that cater to the unique needs of different user segments.

Opportunities that come with a fragmented payment system

As we navigate the complexities of fragmented payment systems, it simultaneously opens the door to a wide array of opportunities for innovation, financial inclusion, and market development. Some of these opportunities include:

1. Partnerships and Collaborations:

Fragmentation encourages collaboration between different players in the payment ecosystem. Financial institutions, technology companies, and other stakeholders can form partnerships to create interoperable solutions. These collaborations can lead to shared standards, enhanced security measures, and more efficient cross-border transactions.

2. Financial Inclusion Initiative

By leveraging diverse payment methods, financial institutions and service providers can reach unbanked and underbanked populations. Mobile money platforms, for example, have successfully expanded access to financial services in regions with limited traditional banking infrastructure.

3. Specialized Solutions for Different Markets

Fragmentation allows for the development of specialized payment solutions tailored to the needs of specific markets or user demographics. Entrepreneurs and businesses can identify niches within the payment ecosystem and design targeted services. For example, solutions optimized for rural areas with limited access to traditional banking can thrive in environments where conventional banking infrastructure is lacking.

4. Market Entry for New Players

Through fragmentation, new players can get the opportunity to enter the market and disrupt traditional financial models. Startups can introduce innovative payment methods, technologies, or business models that cater to the unique challenges of a fragmented system. This fosters healthy competition and can lead to more consumer-centric and cost-effective solutions.

Towards a unified payment infrastructure

The journey to resolve payment fragmentation in Africa is a journey towards a more inclusive, efficient, and innovative financial future. By embracing the opportunities presented within the challenges, stakeholders can collaboratively work towards a unified payment infrastructure that stimulates economic growth, empowers individuals and businesses, and ultimately contributes to the realization of a prosperous and digitally connected Africa.

Payment infrastructure such as the Kotani Pay API is built specifically to address the fragmentation challenge across Africa. The plug-and-play solutions offer businesses the opportunity to integrate with one API and access payment options such as banks, cards, and mobile money in different jurisdictions across Africa. This means businesses get to save on time and cost of accessing multiple payment platforms and enjoy the convenience of a one-time solution for their expansion journey.

Ready to enhance your customers’ experience with ultimate convenience? Look no further — we’re right here with you on your expansion journey. Talk to us and get started



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