Onafriq, the pan-African payments infrastructure company, announced in early November 2023 its collaboration with Ripple to build new payment corridors between Africa, the UK, Australia and the Gulf Cooperation Council (GCC). This partnership seeks to address Africa’s remittance issues.

Although cross-border payments within Africa have risen, sending remittances to the continent is difficult and expensive as transaction costs are hardly affordable and take a while to complete. According to the Trade Law Centre NPC, it costs a little over $15 to send $200 to sub-Saharan Africa. Additionally, statistics published by Statista in 2012 show that Nigeria and Tanzania formed the most expensive countries to send money to, costing $54 and $38 to send $200, respectively.

The high cost of remittance is particularly a problem since many African families depend on remittances from relatives living abroad to survive. Africans rely on remittances so much so, the industry contributes to a substantial portion of many household incomes. For instance, the United Nations says more than 200 million Africans rely on remittances to meet their living expenses. The growth of remittance flow over the last decade also proves Africa’s increased dependence on remittances. The continent received $100 billion in remittance flows in 2022, exceeding the funds obtained through Official Development Assistance (ODA) and Foreign Direct Investment (FDI).

The introduction of digital payments in Africa has eased the transfer of remittances to Africa. They have become the quickest and most affordable way to send money. According to the International Monetary Fund (IMF), the use of digital payments has been on the rise since the COVID-19 outbreak. However, although most of Africa rapidly adopting digital payments, most remittance transfers are cash-based.

Despite improving remittance transfers, Africa’s digital payment system is plagued by complexities and inefficiencies that drive up the cost of remittances. The two main obstacles stopping Africa from having a more effective remittance industry are high transaction costs and low transaction speeds. We can blame the high levels of fragmentation within Africa’s payment infrastructure for setting these obstacles.

Most African countries tend to adopt a protectionist approach regarding their payment infrastructure, with each system gaining significant autonomy This autonomous nature leads to fragmentations between payment infrastructures. As a result, it becomes expensive and time-consuming for people to send money as transactions need to go through many intermediaries. These intermediaries typically consist of correspondent banks (often viewed as the backbone of cross-border payments) slowing down transaction times and increasing remittance costs.

To solve these problems there needs to be a change in approach. African countries need to form a form of co-dependency regarding their payment infrastructures. A quick way to do this is to integrate blockchain technology into the system and this is what Onafriq sets out to do in its partnership with Ripple.

Integrating blockchain technology is especially a good idea because it completely removes the need for intermediaries. Since it is impossible to alter information within a blockchain, there is no need for a third party or intermediary to verify the information. The Organisation for Economic Co-operation and Development (OECD) has said that blockchain technology can potentially build a network for cross-border transactions and replace correspondent banking networks, lowering settlement costs and improving efficiency.

Onafriq will build new payment corridors using Ripple’s blockchain payment system—Ripple Payments—along with the help of its three partners, PayAngel, PyyPl and Zazi Transfer, which will improve remittance transactions to Africa. It will also allow residents within the three supported regions (UK, Australia and the GCC) to make quick and affordable remittances and business payments to the 27 African countries within Onafriq’s payments network. These countries include South Africa, Nigeria and Kenya.

Onafriq’s partnership with Ripple looks to facilitate faster, easier and more cost-effective international money transfers to Africa, and speed up financial inclusion across the continent. This new payment infrastructure will eliminate problems traditional banks face concerning cross-border payments. It will bring quicker, more reliable, and cost-efficient international money transfers to Africa thereby improving financial inclusion.

Onafriq’s Founder and CEO Dare Okoudjou has said: “Our mission is to make borders matter less when it comes to payment within, to, and from Africa. We are advancing this mission through our partnership with Ripple, which is already enabling new types of connections with fintechs such as PayAngel, Pyppl and Zazi Transfer.” He also stated that the collaboration with Ripple will represent a bold first step towards leveraging blockchain technologies to amplify their impact on the continent.