This is an excerpt from the
Future of Embedded Finance in Africa 2025 report.
E-commerce in Africa is booming, driven by increasing access to internet and smart phones across the continent, combined with affordable data plans, a young and tech-savvy population, as well as the growing availability of digital payment methods.
Statista expects the revenue of the e-commerce industry across Africa to reach USD $56 billion by 2026 – a 204% increase from 2019 and forecast at a compound annual growth rate of 11.75%.
Embedded finance is the backbone of e-commerce and its astounding growth trajectory, and embedded e-commerce has the potential to significantly enhance this growth and reach new markets with the use of embedded alternative financing models.
Embedded financing options such as buy-now-pay-later (BNPL) are proven to increase conversion
by up to 30%, unlocking access to financial services to those that it was not previously available to.
Rajesh Savji Parmar, founder and CEO of Indelible Inc., commented: “There are BNPL companies in markets like Nigeria (PayLater), but e-commerce growth relies on better infrastructure in what is still a heavily cash-based continent. Embedded finance can plug
into innovations that already exist in micro finance, but it should not be the precursor.”
The impact of these technologies can be significant. In terms of affordability, BNPL provides the ability to spread costs over several instalments, allowing customers to make purchases they might not otherwise be able to make. This could not only boost the
overall volume of sales but the average order value as well.
“In regions where traditional credit options are limited, BNPL provides an alternative means of accessing credit, enabling more consumers to participate in the e-commerce market,” Parmar adds. “Africa is incredibly innovative – it has to be.”
Can embedded e-commerce help close the African SME gap?
It’s not just consumers that can gain access to capital that would otherwise be unavailable to them – embedded e-commerce can also help SMEs to gain access to financing. A report by the
London Stock Exchange Group found that SMEs are the backbone of the African economy, comprising 90% of all companies and providing nearly 80% of the region’s employment. Yet, 40% of SMEs state that accessing finance is the primary factor constraining their
growth.
These challenges mean there is an excessive dependence on the banking sector in the African market, as short-term debt is often seen as the only viable option for many SMEs. The report found that these issues led to restricted SME participation due to onerous
credit checks from foreign banks, non-performing loans caused by relationship-based lending, negative reinforcement tools as well as prohibitive collateral requirements.
Adopting innovative technologies, like embedded e-commerce solutions, can allow SMEs in the region to make leapfrog advancements.
“Embedded e-commerce can significantly help close the African SME gap by providing seamless, integrated tools that simplify online selling. At Binance Africa, we see how these solutions enable SMEs to reach wider markets, streamline payment processes, and
improve operational efficiency without needing extensive technical resources,” commented Hannes Wessels, country head for South Africa, Binance.
Even though the continent is still heavily dependent on cash, digital payments are redefining day-to-day transactions. Wessels adds: “Recent data from FiveWest reveals a 26.50% increase in cryptocurrency transaction volume in South Africa, underscoring the
country’s readiness for innovative financial solutions. This demonstrates how embedded e-commerce can drive growth and economic development for SMEs across Africa.”
Parmar added: “E-commerce companies, like Wasoko or Konga, have raised a ton of investment, but apps are not a magic bullet for cooperatives and Mom & Pop-type stores, which are everywhere in the continent."
In a mobile heavy region, telecom companies are fuelling growth in consumer electronic payments, and
McKinsey finds that improvements in Wallets in the region is leading to an extension of the usual wallet service to also include embedded services like in-app shopping as well as integration with online merchants, marketplaces, and platforms in what McKinsey
refers to as Wallets 3.0.
Barriers to entry – how to unlock the potential of embedded e-commerce
Though while embedded e-commerce presents a significant opportunity in the African market, there are other factors that need to be addressed to unlock the true potential of technology.
These challenges lie primarily in physical logistics and delivery as well as interregional trade and the regulatory landscape. Parmar highlighted: “The biggest issues are of course in rural areas. Embedded e-commerce has the potential to address financial
inclusion, connecting cities and rural areas, increase Africa’s global presence and presents a big opportunity for the African Continental Free Trade Area (AfCFTA). But there is a long way to go. Currently, the intercontinental African agreement is stuttering.”
Historically, inter-continental trade has faced a plethora of barriers designed to protect local markets from regional competition, which means that currently, it is
6.1% more expensive to import goods from within the continent than it is to import from outside of Africa.
Some of these issues were addressed at the annual summit of the African Union (AU) in February 2024.
Al Jazeera reported that the AU is planning to ‘revolutionise trade on a continent where country-to-country trade levels are dismal’, primarily through updates and improvements to the AfCFTA.
The AfCFTA is designed to merge 55 African economies into a single mega market and has originally been introduced as early as 2019, yet has so far faced challenges regarding information sharing between countries, existing small businesses (which make up
the bulk of traders) being excluded from the framework, and other continuity problems.
Another key challenge to e-commerce across the continent are regulatory gaps combined with weak implementation of existing e-commerce legislation. Last year,
GSMA released data from surveys conducted with over 1,500 micro-, small- and medium-sized enterprises (MSMEs) who were using e-commerce across six African markets.
Most damning, the data shows that in Ghana, only 29% of MSMEs surveyed stated they understood existing e-commerce regulations, reflecting the uncertainty across the markets. The study also found that between 21% and 26% of all MSMEs were facing regular delivery
challenges, including lost or damaged goods, shipping costs and low shipping capacity.
In order for embedded e-commerce to thrive across the region – unlocking the potential it holds to lower barriers-to-entry and close the SME gap – these concerns need to be addressed. Better infrastructure and inter-regional trade agreements are needed for
trade to flourish. Once these conditions are made possible, African businesses can take advantage of technology to reap the real benefits of embedded e-commerce and embedded alternative financing solutions.