AI Revolutionizes Cross-Border Payments in East Africa, But High Costs Persist

Summary:

• AI is rapidly transforming the financial sector in East Africa, particularly in improving cross-border payments by enhancing fraud detection, customer service, and transaction speed. However, high transaction costs remain a significant challenge, with some payments incurring fees up to 50%.

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Artificial Intelligence (AI) is rapidly transforming industries worldwide, and the financial sector is no exception. In East Africa, AI has quickly become integral to enhancing payment systems, addressing longstanding challenges in cross-border transactions that have traditionally slowed down the banking industry.

Regional banks have embraced this technological shift, with nearly all local financial institutions deploying AI to streamline both local and international payments. According to Jeremy Awori, CEO of Ecobank Group, AI is mainly being utilized in the region to combat payment fraud, improve customer service, and increase transaction speed and efficiency. “AI systems analyze transaction trends,” Awori explained in an interview with The EastAfrican. “This helps improve the customer experience and identify irregularities, minimizing fraud and theft.”

With AI, banks can track transaction habits—such as how often a Kenyan trades with a Tanzanian—and use this data to suggest relevant services to facilitate further business. AI can also detect frequent travel patterns, allowing it to recommend services like travel insurance. Additionally, machine learning systems can identify unusual payment behaviors, halting potentially fraudulent transactions without human involvement.

A recent global report from KPMG highlights the growing role of AI in the financial industry worldwide. The sector is leading in the adoption of AI technologies, with nearly 29% of firms reaching advanced stages in their use of AI. Financial companies are utilizing AI for tasks such as financial planning, accounting, risk management, and treasury operations, with significant applications also in tax management and reporting.

However, AI in East Africa faces a significant challenge that remains unsolved—high transaction costs in cross-border payments. Payment corridors within the region are among the most expensive globally. For instance, a Tanzanian paying for goods in Uganda may face transaction fees of up to 50% of the total amount, with settlements that can take hours to complete.