With around 5,2% of the total GDP of Africa In 2023, flowing from remittance inflows of an estimated total of $90.2 billion according to RemitScope Africa, cross border payments are a crucial link in the African Economy.
While a large number of advances in this area have coming from technological advancements in the fintech sector, that are reshaping cross-border transactions, the role of credit bureaus in the cross-border payments sector cannot be overlooked.
Credit bureaus serve as critical enablers of financial transactional security, helping lenders gain valuable insights into individuals and businesses credit performance and histories.
Scope of Credit Insights Expanded
Within the rapidly evolving digital finance landscape however, these services need to adapt and expand their reach and scope of insights beyond the traditional credit data used traditionally.
Mladen Čolić, Sales Vice President: Fintech Africa at TransUnion, provides some useful insight into the need for further credit data.
“TransUnion is automating previously manual processes”, he states “And this automation reduces the drop-off rate, ensuring fewer recipients have their money returned, thereby driving further financial inclusion”. “Additionally, TransUnion’s fraud and AML (Anti-Money Laundering) and KYC (Know Your Customer) solutions help remittance providers comply with regulations and curb illicit flows of funds, enhancing the security and reliability of cross-border transactions” says Čolić.
Payment History Important Role in Credit Worthiness
Beyond conventional credit metrics, alternative data sources present an opportunity to bridge the financial gap for the unbanked and underbanked populations. Remittance flows, mobile money transactions, and digital payment histories can serve as credible indicators of financial behaviour.
Similarly, cross-border payments can also become a measurable attribute for individuals to build creditworthiness.
Imagine, for instance, that a remittance received consistently from a relative abroad can be leveraged as proof of income, enabling access to credit in the recipient’s country. Similarly, frequent mobile wallet transactions can indicate financial responsibility, creating pathways to formal financial services. Financial institutions, in collaboration with credit bureaus, can develop models that use such data to assess creditworthiness, expanding financial access to millions.
With greater reliance on digital transactions and data-driven credit scoring, ensuring consumer trust and robust data protection and regulatory compliance is of great importance. New technologies such as privacy-preserving platforms, tokenisation and cryptographic techniques, are finding their ways to mainstream adoption ensuring compliance with evolving regulatory frameworks.
Additionally, a seamless flow of financial data across borders could enhance risk assessment and fraud detection, reducing default rates and improving financial transparency. By working closely with FinTechs, regulators, and financial institutions, credit bureaus can help create a more integrated, inclusive, and secure cross-border financial ecosystem.
Empowering Consumers with Financial Knowledge Critical.
“Many consumers in Africa remain unaware of how credit systems function and how behaviour such as making consistent payments can improve their credit profile to make it possible to access loans, says Čolić. “By integrating financial literacy programmes into digital platforms, including gamified learning tools and AI-driven credit coaching, credit bureaus can play a vital role in equipping individuals with the knowledge they need to navigate the evolving financial landscape” He states.
The evolution of cross-border payments in Africa will continue to hinge on innovation, regulatory cohesion, and inclusive financial infrastructure, and while FinTech advancements are accelerating accessibility and affordability, credit bureaus are able to play a vital part in formalizing a valuable source of alternative data into its credit scoring that could prove to be a powerful enabler in driving financial inclusion on the Africa continent.
