Skip to content

Unravelling Complexities Of Cross-Border Payments For SA Enterprises

South African businesses that dare to venture beyond African shores into Europe and the United States are met with a host of complexities. Regulatory bottlenecks, extended transaction times, fluctuating exchange rates, and lack of cost predictability pose daunting challenges to these ambitious enterprises. The McKinsey Global Payments report (2022) underscores this predicament, highlighting how the traditional banking landscape with its many intermediaries and unpredictable fees complicates cross-border transactions.

Moreover, the incessant fluctuations of currency exchange rates pose a constant threat to the profitability and strategic planning of these businesses. For instance, the significant trade between South Africa and the European Union, which was valued at €26.4 billion in 2022, is affected by the unpredictability of exchange rates. 

The Gravity of Cross-Border Payment Challenges

The impact of cross-border payment challenges on South African enterprises extends far beyond transaction difficulties. The opportunity cost of time and resources spent navigating these complexities can be significant. A delay in transaction time can lead to missed business opportunities and stunted growth, while unpredictability of fees and currency volatility can eat into profitability, hindering sustainability and strategic expansion plans.

World Bank report indicated that the cost of sending payments from South Africa is one of the highest globally, with costs averaging 15.05%, substantially higher than the global average of 6.24%. These statistics emphasise the need for more efficient solutions for cross-border payments to drive the growth of South African enterprises.

Seizing Opportunities: Expansion into Africa and Europe

Despite these challenges, South African enterprises have considerable opportunities for expansion, especially within Africa and Europe. The African Continental Free Trade Area (AfCFTA), launched in January 2021, has created one of the world’s largest single markets with a GDP of $3.4 trillion. This presents a massive opportunity for South African businesses to tap into this integrated market and drive their growth.

Furthermore, the relationship between South Africa and Europe continues to flourish, with the EU being South Africa’s largest trading partner. According to the European Commission, trade in goods between the two partners has increased by more than 120%. This growth trajectory suggests a ripe opportunity for South African enterprises to deepen their reach in these markets, leveraging the potential for increased trade and investment.

The Transformative Power of Fintech Solutions

In the face of these seemingly insurmountable challenges, fintech solutions emerge as the beacon of hope. McKinsey’s report shone a light on the rise of non-cash retail payment transactions, with a compound annual growth rate of 13% between 2018 and 2021. Looking to emerging markets, this figure grows to 25% with the fastest growth occurring in Morocco, Nigeria, and South Africa. 

Ola Oyetayo, Chief Executive Officer at Verto, says these innovative financial technologies promise to get rid of barriers, offer seamless international payouts and currency conversion, and make cross-border payments a breeze.

“For example, one solution paving the way in this space is Verto’s cross-border payment offering,”he  explains. “This service, designed to simplify complex payment landscapes, is a game-changer for businesses keen on conquering global markets. With Verto, companies can conduct transactions in a swift, transparent and efficient manner, thereby accelerating their global growth trajectory.”

Partnering with an expert in digital wallets and cross-border payments provides growing businesses out of Africa with the global support and regulatory intelligence they need to comply with highest standards of compliance. This support may not always be offered to South Africa’s large corporations by local fintech start-ups.

Unleashing Growth Potential 

Enterprise organisations need a  global payouts solution that delivers swift transactions and helps them save valuable time and resources. Additionally, a transparent fee structure ensures businesses can predict costs, manage their budgets effectively, and focus on growth and importantly, job creation, rather than administrative complexities.

“In an increasingly tough economic climate, businesses are looking for every possible competitive advantage,” says Oyetayo. “With Verto’s real-time conversion solution, businesses can guard against exchange rate volatility by availing competitive rates for almost 50 currencies, a feature that’s critical for enterprises looking to solidify their position in global markets. With larger FX volumes being traded, enterprise businesses can unlock even better rates.” 

Transforming Challenges into Opportunities 

South African enterprises can turn these challenges into advantages and capitalise on the opportunities within Africa and Europe through efficient, transparent, and cost-effective cross-border payment services.

“The key is for local companies to be able to facilitate smooth transactions within the AfCFTA and EU markets,” explains Oyetayo. “This will enable them to leverage the burgeoning growth within these markets, drive their international expansion, and solidify their position as global players,” he concludes.